8-K

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
August 27, 2001 (August 10, 2001)

MARKWEST HYDROCARBON, INC.
(Exact name of registrant as specified in its charter)

DELAWARE	1-11566	84-1352233
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)	(Commission File Number)	(I.R.S. EMPLOYER IDENTIFICATION NO.)

155 Inverness Drive West, Suite 200
DENVER, COLORADO  80112
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(303) 290-8700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

Item 2. ACQUISITION OR DISPOSITION OF ASSETS.

         MarkWest Hydrocarbon, Inc. announced on August 13, 2001 the acquisition of two privately owned independent exploration and production companies – Leland Energy Canada Ltd. (“Leland”) and Watford Energy Ltd. (“Watford”), both headquartered in Calgary, Alberta, Canada. Leland and Watford were acquired for $51 million (U.S.) on August 10, 2001.  100% of the interest in Watford was acquired from eight individuals including four individuals managing the operations of both Leland and Watford.  100% of Leland was acquired from Kaiser Energy Ltd.  The management group for both Leland and Watford will remain in place.

         Leland and Watford’s oil and gas exploration and production assets are located in central and southern Alberta, Canada, with estimated total net proved reserves of 26.4 billion cubic feet equivalent (Bcfe) of natural gas.  The acquisition also adds to MarkWest’s exploration and production inventory more than 300 drillable locations, mostly defined by three-dimensional (3D) seismic, located on more than 106,000 acres.

         This transaction has been funded using bank debt through an expanded $130 million line of credit with MarkWest’s lead banker, Bank of America N.A.

###

         Markwest hydrocarbon, inc., Operates through two business segments: gathering, processing, and marketing and exploration and production. The gathering, processing, and marketing portion is our traditional "midstream" business, which involves gathering natural gas from the wellhead and removing impurities such as co2 and sulfur dioxide along with the valuable natural gas liquids. We also have very extensive storage, transportation and marketing facilities. The exploration and production segment produces natural gas in the San Juan Basin of Colorado and new Mexico, western and eastern Michigan, and with this transaction, Alberta, Canada. Not only is this second segment growing very rapidly, but it also helps drive our midstream business as we provide services to other producers.

         THIS PRESS RELEASE INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED OR INCORPORATED HEREIN MAY CONSTITUTE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO BE CORRECT. THE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES THAT AFFECT THE COMPANY'S OPERATIONS, FINANCIAL PERFORMANCE AND OTHER FACTORS AS DISCUSSED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. AMONG THE FACTORS THAT COULD CAUSE RESULTS TO DIFFER MATERIALLY ARE THOSE RISKS DISCUSSED IN THE COMPANY'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000.

Item 7. FINANCIAL STATEMENTS AND EXHIBITS.

         (a) Financial statements for Leland and Watford, pursuant to the requirements of Form 8-K, will be filed no later than October 23, 2001.

         (b) Pro forma financial statements for the combined entity, pursuant to the requirements of Form 8-K, will be filed no later than October 23, 2001.

         (c) Exhibits.

	The following exhibit is furnished as part of this report.
	2.1	–	Share Purchase Agreement between MarkWest Acquisitions Corp. and  Kaiser Energy Ltd.*
	2.2	–	Share Purchase Agreement between MarkWest Acquisitions Corp., Brian E. Hiebert, Guy C. Grieson, Ian R. De Bie, Gordon A. Maybee, Erin Hiebert, Raylene Grierson, Kathleen De Bie, and Patricia Maybee.*
	10.1	–	Bank Credit Agreement between MarkWest Hydrocarbon,  Inc. and Bank of America N.A.*
	99.1	–	Press Release dated August 13, 2001.
* Schedules omitted.  MarkWest agrees to provide supplementally a copy of the schedules to the Commission upon request.

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date:  August 27, 2001	MarkWest Hydrocarbon, Inc.
	By:	/s/ Gerald A. Tywoniuk
		Gerald A. Tywoniuk Chief Financial Officer and Vice President of Finance (On Behalf of the Registrant and as Principal Financial and Accounting Officer)

INDEX TO EXHIBITS

EXHIBIT NUMBER	DESCRIPTION
2.1	Share Purchase Agreement between MarkWest Acquisitions Corp. and Kaiser Energy Ltd.
2.2	Share Purchase Agreement between MarkWest Acquisitions Corp., Brian E. Hiebert, Guy C. Grieson, Ian R. De Bie, Gordon A. Maybee, Erin Hiebert, Raylene Grierson, Kathleen De Bie, and Patricia Maybee.
10.1	Bank Credit Agreement between MarkWest Hydrocarbon, Inc. and Bank of America N.A.
99.1	Press Release dated August 13, 2001.

EX-2.1

EXHIBIT 2.1

MARKWEST ACQUISITIONS CORP.
KAISER ENERGY LTD.
LELAND ENERGY CANADA LTD.

SHARE PURCHASE AGREEMENT

August 10, 2001

ARTICLE 1
DEFINITIONS AND SCHEDULES
1.1	Definitions
1.2	Schedules
1.3	References and Headings
1.4	Singular/Plural; Derivatives
1.5	Statutory References
1.6	Conflicts
1.7	Accounting References
1.8	Preparation of Effective Date Balance Sheet and Financial Statements
1.9	Vendor's Knowledge
1.10	Purchaser's Knowledge
ARTICLE 2
PURCHASE AND SALE OF LELAND ENERGY SHARES
2.1	Purchase and Sale of Leland Energy Shares
2.2	Purchase Price and Allocation of Purchase Price
2.3	Incremental Adjustment to Purchase Price
2.4	Deposit
2.5	Adjustments to Purchase Price
2.6	Interest Accrues on Amounts Owing
2.7	Manner of Payment
ARTICLE 3
CLOSING
3.1	Place and Closing Time
3.2	Deliveries at Closing
3.3	Escrow of Funds
ARTICLE 4
INTERIM PERIOD
4.1	Access
4.2	Maintenance of Business and PNG Assets
4.3	Certain Changes Restricted
4.4	Dealings or Operations re PNG Assets
4.5	Proposals for Dealings or Operations re PNG Assets
4.6	Existing Authorizations for Expenditure
4.7	Certain Bonuses and Dividends
4.8	Prohibited Negotiations
4.9	Insurance
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARTIES
5.1	Vendor's Representations and Warranties
5.2	Purchaser's Representations and Warranties
5.3	Survival of Representations and Warranties
5.4	Survival of Representations and Warranties re Tax
5.5	No Additional Representations Or Warranties By Vendor
5.6	No Merger
ARTICLE 6
ACCESS TO PNG ASSETS
6.1	Vendor To Provide Access to PNG Assets
ARTICLE 7
CONDITIONS TO CLOSING
7.1	Conditions to the Obligations of the Purchaser
7.2	Conditions to the Obligations of Vendor to Close
7.3	Parties To Exercise Diligence With Respect To Conditions, etc.
7.4	Waiver Of Conditions
7.5	Failure To Satisfy Conditions
ARTICLE 8
TERMINATION
8.1	Grounds for Termination
8.2	Effect of Termination
8.3	Entitlement to Deposit on Termination
ARTICLE 9
INFORMATION, MATERIALS AND CONTINUING REPORTS
9.1	Access to Information
9.2	Tax Returns
ARTICLE 10
LIABILITY AND INDEMNIFICATION
10.1	Defined Terms
10.2	Responsibility of Vendor
10.3	Responsibility of Purchaser
10.4	Limit on Vendor's Responsibility
10.5	Responsibility Extends To Legal Costs and Settlements
10.6	Limitations
10.7	Limitation on Rights or Remedies
10.8	Notice of Claim
10.9	Direct Claims
10.10	Third Party Claims
10.11	Settlement of Third Party Claims
10.12	No Merger of Legal Responsibilities
ARTICLE 11
ARBITRATION
11.1	Reference to Arbitration
11.2	Reference to Arbitration
ARTICLE 12
CONFIDENTIALITY OF THE PURCHASER AND PRESS RELEASE
12.1	Return of Documents
12.2	Press Release
ARTICLE 13
MISCELLANEOUS PROVISIONS
13.1	Waiver Must Be In Writing
13.2	No Amendment Except In Writing
13.3	Assignments Before Closing
13.4	Service Of Notice
13.5	Addresses For Notices
13.7	Costs and Expenses
13.8	Further Assurances
13.9	Governing Law; Attornment; Etc.
13.10	Invalidity of Provisions
13.11	Time
13.12	Supersedes Earlier Agreements
13.13	Enurement
13.14	Counterpart Execution

SHARE PURCHASE AGREEMENT

             THIS SHARE PURCHASE AGREEMENT is made as of this 10th day of August, 2001.

BETWEEN:

KAISER ENERGY LTD., an Alberta Corporation(the "Vendor")

– and –

MARKWEST ACQUISITIONS CORP., an Alberta corporation (the "Purchaser")

WHEREAS:

A.         the Leland Shares are currently owned by the Vendor;

B.          the Vendor desires to sell and the Purchaser desires to purchase, all of the Leland Energy Shares, upon and subject to the terms and conditions set forth in this Agreement.

NOW THEREFORE, for good and valuable consideration (the sufficiency and receipt of which is acknowledged by each Party), the Parties agree as follows:

ARTICLE 1
DEFINITIONS AND SCHEDULES

1.1        Definitions

In this Agreement, including the recitals and the Schedules, unless otherwise stated or the context otherwise requires:

"Abandonment and Reclamation Obligations" means all remediation and reclamation obligations of Leland Energy, including:

(a)         the proper abandonment and reclamation of any Wells; and

(b)        the closure, decommissioning and dismantling of Tangibles, and the restoration of the surface in respect thereto, all in accordance with good oil and gas field practices, and in compliance with Applicable Law.

"Accounting Firm" means KPMG, Chartered Accountants, or such other firm of chartered accountants as may be selected by the Parties.

"Additional Indemnitees" has the meaning attributed to it in Section 10.1.

"Adjusted Working Capital" means the book value of the current assets of Leland Energy, as recorded on the Effective Date Balance Sheet, less the aggregate, without duplication, of (i) the book value of the current liabilities of Leland Energy, as recorded on the Effective Date Balance Sheet, plus (ii) the book value of the debt in the Effective Date Balance Sheet) of Leland Energy as recorded on the Effective Date Balance Sheet, plus (iii) any liability in respect of any Futures Transaction; PROVIDED HOWEVER that: (A) all revenues, expenses and costs prior to the Effective Date, will be accrued in accordance with Section 1.8 as if received or paid, as the case may be, prior to the Effective Date.

"Affiliate" means, in respect of a Person, any other Person or group of Persons acting in concert, directly or indirectly, that controls, is controlled by or under common control with the first mentioned Person, and for the purposes of this definition "control" means the possession, directly or indirectly, by such Person or group of Persons acting in concert, of the power to direct or cause the direction of the management and policies of the first mentioned Person, whether through the ownership of voting securities or otherwise.

"Agreement" means this document, together with the Schedules attached hereto and made a part hereof, all as amended, supplemented or modified from time to time in accordance with the provisions hereof.

"Applicable Law" means, in relation to any Person, transaction or event, all applicable provisions of laws, statutes, rules, regulations, official directives and orders of all federal, provincial, municipal and local governmental bodies (whether administrative, legislative, executive or otherwise) and judgments, orders and decrees of all courts, arbitrators, commissions or bodies exercising similar functions in actions or proceedings in which the Person in question is a party, by which it is bound or having application to the transaction or event in question.

"Arbitrator" has the meaning set forth in Section 2.5(e).

"Burdens" means, collectively, Royalty Interests and Security Interests.

"Business Day" means a day on which banks are generally open for the transaction of commercial business in both Calgary, Alberta and Denver, Colorado but does not in any event include a Saturday or a Sunday or a bank holiday under Applicable Law.

"Closing" means the completion of the purchase and sale of the Leland Energy Shares as contemplated by this Agreement.

"Closing Date" means the later of (i) August 10, 2001, (ii) the Business Day after the date on which all the conditions to Closing are satisfied or waived, and (iii) the Outside Date.

"Closing Funds" has the meaning ascribed to it in Section 2.4.

"Closing Time" means the time that the documents or actions effecting the transactions comprising the Closing are delivered or taken and released from the terms of any escrow governing the Closing.

"Confidentiality Agreement" means the Confidentiality Agreement dated May 15, 2001, among Leland Energy, MarkWest Hydrocarbons Inc. and Waterous Securities Inc. a copy of which is attached hereto as Schedule 1.2(m).

"Deposit" means an amount equal to 5% of the Purchase Price.

"Deposit Interest" has the meaning ascribed to it in Section 2.4.

"Dollar" or "$" means, unless otherwise provided herein, a dollar in the lawful money of Canada.

"Effective Date" means 11:59 p.m. on March 31, 2001.

"Effective Date Balance Sheet" means the balance sheet of Leland Energy dated March 31, 2001 prepared in accordance with Section 1.8.

"Environmental Damage" means any one or more of:

(i)          ground water, surface water or aquifer contamination;

(ii)         soil contamination;

(iii)        substance or energy emissions which are either toxic or hazardous;

(iv)       death or injury to plant, animals or human beings due in whole or in part to any of the foregoing items (i) through (iii),

but only to the extent the foregoing is or has been in breach of or exceeds limitations imposed by Environmental Law and shall not include Abandonment and Reclamation Obligations.

"Environmental Law" means Applicable Law respecting the protection of, or the control of contamination or pollution of soil, air or water (including ground water) and human health and safety.

"Escrow Agent" has the meaning ascribed to it in Section 3.3.

"Escrow Agreement" means an agreement substantially in the same form as attached hereto as Schedule 1.2(l).

"Escrow Amount" has the meaning ascribed to such term in Section 3.3.

"Financial Statements" means collectively, (i) the balance sheet of Leland Energy as at March 31, 2001 and related income statements and statements of changes in financial position for the fiscal year then ended, and (ii) the Effective Date Balance Sheet and related income statements and statements of cashflow of Leland Energy for the 9 months then ended, a copy of which is attached as Schedule 1.2(c).

"Futures Transaction" means any derivatives transaction (including an agreement with respect thereto) which is commonly referred to as a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination of these transactions.

"GAAP" or "generally accepted accounting principles" means accounting principles generally accepted at the relevant time in Canada, and where the "CICA Handbook", as amended from time to time, or any successor publication published by the Canadian Institute of Chartered Accountants, contains (i) a single recommendation as to treatment of a matter, such recommendation shall constitute GAAP and generally accepted accounting principles herein, or (ii) more than one recommendation as to treatment of a matter, any of such recommendations shall constitute GAAP and generally accepted accounting principles herein.

"Gulf Transactions" means the transactions consummated in accordance with the agreement titled "Purchase of Partnership Interest of Leland Energy Partnership by Gulf Canada Resources Limited" dated May 15, 2000 among Kaiser Energy Ltd., Hiebert Resources Ltd., Grierson Resources Ltd., Wild River Resources Ltd. and Maybee Resources Ltd. and Gulf Canada Resources Limited and 758350 Alberta Inc. and the agreement titled "Purchase of Shares of Leland Energy Resources Ltd. by Gulf Canada Resources Limited" dated June 12, 2000 among Kaiser Energy Ltd., Hiebert Resources Ltd., Grierson Resources Ltd., Wild River Resources Ltd. and Maybee Resources Ltd. and Gulf Canada Resources Limited.

"Hazardous Materials" means (i) pollutants, contaminants and hazardous or toxic chemicals, materials, substances or wastes, and (ii) any chemical, material, substance or waste that is regulated pursuant to any Environmental Law.

"include" and "including" mean "include, without limitation" and "including, without limitation", respectively.

"Indemnified Losses" has the meaning attributed to it in Section 10.1.

"Interim Period" means the period between the Signing Date and the Closing Date.

"Interest Rate" means an annual rate of interest of five (5%) percent.

"Land Schedule" means Schedule 1.2(a), as amended by the Parties at anytime prior to Closing.

"Lands" means the lands set forth and described in the Land Schedule including the Petroleum Substances within, upon or under the lands (subject to the restrictions and exclusions set forth in the Leases as to the Petroleum Substances and geological formations), but does not include Surface Rights.

"Leases" means the leases, licences, permits and other documents of title, by virtue of which the holder thereof is entitled to drill for, win, take, store, own or remove the Petroleum Substances or dispose of saltwater brine within, upon or under the Lands or by virtue of which the holder thereof is deemed to be entitled to a share of Petroleum Substances removed from the Lands or any lands with which the Lands are pooled or unitized and includes, if applicable, all renewals and extensions of such documents and all documents issued in substitution therefor.

"Leland Energy" means Leland Energy Canada Ltd., a corporation incorporated pursuant to the laws in force in the Province of Alberta, Canada.

"Leland Energy Shares" means all of the issued and outstanding Shares of Leland Energy.

"Miscellaneous Interests" means all of the right, title, interest and estate of Leland Energy in and to all property, rights and assets, whether contingent or absolute, legal or beneficial, present or future, vested or not, and not being Petroleum and Natural Gas Rights or Tangibles, which pertain to such Petroleum and Natural Gas Rights or Tangibles, including the following property, rights and assets:

(i)          contracts, agreements and documents (including Title and Operating Documents) relating to any of such Petroleum and Natural Gas Rights or Tangibles or any rights in relation thereto;

(ii)         Surface Rights which are used or useful in connection with any of such Petroleum and Natural Gas Rights or Tangibles;

(iii)        permits, licences, authorizations and deposits relating to any of such Petroleum and Natural Gas Rights or Tangibles, or the use thereof;

(iv)       all well bores located on the Lands or lands pooled or unitized therewith which may be used to produce Petroleum Substances from the Lands or lands pooled or unitized therewith or otherwise serve such lands;

(v)        books, maps, records, documents, seismic, geological, data processing, well, plant and other reports, files, data, information, tapes, disks, computer programs, papers or other records, which relate to or are necessary or useful in connection with any of such Petroleum and Natural Gas Rights or Tangibles or any of the property or assets referred to in (i) to (iv) of this definition;

(vi)       all extensions, renewals, replacements or amendments of the foregoing items described in items (i) to (v) of this definition.

"Notice of Claim" has the meaning attributed to it in Section 10.1.

"Objection Date" has the meaning ascribed to it in Section 2.5(d).

"Outside Date" means 5:00 p.m. on the 31^st day of August, 2001, or such later date as the Parties may agree in writing or may be expressly provided for herein.

"Parties" means the Vendor and the Purchaser and "Party" the Vendor or the Purchaser, as applicable.

"Permitted Defects" means:

(i)          Permitted Encumbrances;

(ii)         Abandonment and Reclamation Obligations which under Applicable Law, as of the Closing Date, are not yet required to be undertaken; and

(iii)        any defects which are deemed to be Permitted Defects under Section 4.5(e).

"Permitted Encumbrances" means:

(i)          easements, rights of way, servitudes or other similar Surface Rights, including, without limitation, rights of way and servitudes for highways, railways, sewers, drains, gas and oil pipelines, gas and water mains, electric light, power, telephone or cable television conduits, poles, wires or cables;

(ii)         the right reserved to or vested in any government, municipality or other public authority by the term of any Title and Operating Documents or by Applicable Law to terminate any Title and Operating Documents or to require annual or other periodic payments as a condition of the continuance thereof;

(iii)        rights of general application reserved to or vested in any governmental authority to levy taxes or other levies on Petroleum Substances or the income or revenue therefrom and governmental requirements pertaining to production rates from wells on the Lands or operations being conducted on the Lands or otherwise affecting the value of any property;

(iv)       any rights reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any of the PNG Assets in any manner;

(v)        the terms and conditions of the Title and Operating Documents;

(vi)       undetermined or inchoate liens incurred or created in the ordinary course of all business as security in favour of any Person for Leland Energy's proportionate share of the costs and expenses applicable to the development or operation of any of the PNG Assets which are not due or delinquent or are being contested in good faith;

(vii)      the reservations, limitations, provisos and conditions in any grants or transfers from the Crown of any of the Lands or interests therein, and statutory exceptions to title;

(viii)     provisions for penalties and forfeitures under agreements as a consequence of non-participation in operations contained in the Title and Operating Documents or identified in Schedule 1.2(e);

(ix)        liens granted in the ordinary course of business to a public utility, municipality or governmental authority with respect to operations pertaining to any of the PNG Assets;

(x)         any preferential rights of purchase or any similar restriction applicable to any of the PNG Assets contained in the Title and Operating Documents or identified in Schedule 1.2(e);

(xi)        agreements and plans relating to pooling or unitization contained in the Title and Operating Documents or identified in Schedule 1.2(e);

(xii)       builder's, mechanic's, material men's and similar liens in respect of services rendered or goods supplied for which payment is not at the time due;

(xiii)      the Burdens, reduction or conversion or alteration of interests and adverse claims, in each case, set forth in the Land Schedule and all ad valorem, property, production, severance and similar taxes and assessments based on or measured by the ownership of Petroleum and Natural Gas Rights or the production of Petroleum Substances in respect of such Petroleum and Natural Gas Rights, whether or not set forth on the Land Schedule;

(xiv)      Burdens that have not been created by, through or under Leland Energy and of which the Vendor does not have any knowledge on the Signing Date; and

(xv)       other Security Interests as set forth in Schedule 1.2(e).

"Person" includes an individual, a partnership, a corporation, a trust, a joint venture, an unincorporated organization, a union, a government or any department or agency thereof and the heirs, executors, administrators or other legal representatives of an individual.

"Petroleum and Natural Gas Rights" means all of the right, title, estate and interest, whether absolute or contingent, legal or beneficial, present or future, vested or not, and whether or not an "interest in land", held by Leland Energy in or to the Lands and the Leases together with any of the following which relate thereto, by whatever name the same are known:

(i)          rights to explore for, drill for, extract, win, produce, take, save or market Petroleum Substances;

(ii)         rights to a share of the production of Petroleum Substances;

(iii)        rights to a share of the proceeds of, or to receive payment calculated by reference to, the quantity or value of the production of Petroleum Substances, other than the rights under agreements for the sale of Petroleum Substances;

(iv)       the interests set forth in the Land Schedule hereto in and to and in respect of the Leases and the Lands subject to the Permitted Encumbrances;

(v)        rights to acquire any of the rights described in subparagraphs (i) to (iv) of this definition; and

(vi)       interests in any rights described in subparagraphs (i) to (v) of this definition,

including all interests and rights known as working interests, royalty interests, overriding royalty interests, gross overriding royalty interests, production payments, profits interests, net profits interests, revenue interests, net revenue interests, economic interests and other interest, fractional or undivided interests in any of the foregoing, and all freehold, leasehold or other interests in any Lands.

"Petroleum Substances" means petroleum, crude bitumen, natural gas, natural gas liquids, related hydrocarbons and any and all other substances, whether liquid, solid or gaseous (other than coal but including coalbed methane), whether hydrocarbon or not, produced or producible in association with any of the foregoing, including hydrogen sulphide, sulphur water, carbon dioxide, nitrogen and oxygen.

"Place of Closing" means the offices of Blake, Cassels & Graydon LLP located at 3500, 855 - 2nd Street S.W., Calgary, Alberta, or such other place as may be agreed upon in writing by the Parties.

"PNG Assets" the Petroleum and Natural Gas Rights, the Tangibles and the Miscellaneous Interests.

"Proposal" has the meaning attributed to it in Section 4.5.

"Purchase Agreement Default" means any misrepresentation or breach of warranty made by a Party, or the failure of a Party to perform or observe in any respect any of the covenants or agreements to be performed by such Party under this Agreement or any agreement or other certificate or instrument delivered in connection herewith, and includes the obligations set forth in Section 7.3.

"Purchase Price" means the aggregate amount payable by the Purchaser to the Vendor as consideration for the Leland Energy Shares pursuant to Section 2.2 subject to adjustment in accordance with the terms and conditions of this Agreement.

"Purchaser's Counsel" means Fraser Milner Casgrain LLP, Calgary.

"Royalty Interests" means all carried profits, net profits, net revenue, royalty interests (including the obligation attributable thereto to pay all ad valorem, property, production, severance and similar taxes and assessments based on or measured by the ownership of Petroleum and Natural Gas Rights or the production of Petroleum Substances in respect of such Petroleum and Natural Gas Rights) and similar Petroleum and Natural Gas Rights reserved or payable (by way of a share in production of Petroleum Substances or by way of money) to any Person or entity.

"Security Interest" means any mortgage, charge, pledge, lien, hypothec, assignment by way of or in effect as security, or security interest whatsoever, whether arising by agreement or otherwise, but does not include a right of set–off.

"Share Rights" means any instruments or contractual rights capable of being converted into, exchanged for or exercised for Shares of any class of a Person or giving the holder the right on the occurrence of any events, including on the payment of money, whether such events have occurred or not, to require delivery by a Person of Shares of any class of a Person and includes options, warrants, conversion or exchange privileges and similar rights.

"Shareholder Debt" means any indebtedness owed by Leland Energy to the Vendor, or any Affiliate of the Vendor including, without limitation all inter-corporate debt referred to in Section 4.3(a).

"Shares" means any shares of any class of a corporation or body corporate.

"Signing Date" means the date of this Agreement.

"Subsidiary" when used in relation to any Person, means any Affiliate controlled, directly or indirectly, by that Person.

"Surface Rights" means rights (whether fee simple or pursuant to orders, licences, leases, easements, rights–of–way or otherwise) to enter upon, use and occupy the surface of any Lands, any lands with which the same have been pooled or unitized or any lands upon which the Tangibles are located.

"Survival Period" means the period ending 6 months after Closing.

"Take or Pay Delivery Obligations" means the obligation of Leland Energy arising under or pursuant to any contract whereby Petroleum Substances attributable to the Petroleum and Natural Gas Rights or any of them may be sold for or in respect of payments or credits previously received by Leland Energy, its predecessors or others in respect of Petroleum Substances, the delivery of which had not been taken by the buyer thereof at the time of the payment or crediting, whether or not:

(i)          Leland Energy is a party to such contract;

(ii)         the buyer of such Petroleum Substances recognizes Leland Energy, as a seller or has recourse to Leland Energy; or

(iii)        the payment, credit or assumption was made to or by Leland Energy, or was remitted by Leland Energy, to any other Person.

"Take or Pay Payments" means, as at a particular time, the amounts received or receivable by and for the account of Leland Energy, prior to such time as a result of which Leland Energy, has Take or Pay Delivery Obligations which, as at such time, have not been satisfied and have not expired.

"Tangibles" means all right, title, estate and interest, whether absolute or contingent, legal or beneficial, present or future, vested or not, held by Leland Energy in and to any tangible property, apparatus, plant, equipment, machinery and facilities, fixed or non–fixed, real or personal, used or capable of use in exploiting any Petroleum Substances (whether the Petroleum and Natural Gas Rights or which such Petroleum Substances are attributable to or are owned by Leland Energy or by others or all of them), including:

(i)          systems, plants and facilities used or useful in producing, gathering, compressing, dehydrating, scrubbing, processing, treating, separating, extracting, collecting, refrigerating, refining, measuring, storing, transporting or shipping Petroleum Substances;

(ii)         tangible property and assets used or intended for use in exploring for, producing, storing, injecting or removing Petroleum Substances;

(iii)        all extensions, additions and accretions to any item described in subparagraphs (i) and (ii) of this definition; and

(iv)       the Wells;

and including all producing, shut–in, injection, disposal, abandoned and other wells, casing, tubing, wellheads, buildings, plants, erections, production equipment, improvements, flowlines, pipelines, pipeline connections, extraction facilities, meters, generators, motors, compressors, separators, gas treating and processing equipment, dehydrators, scrubbers, pumps, refineries, pump jacks, tanks, boilers, communications equipment, enhanced recovery systems and other machinery, apparatus and equipment.

"tax" includes all income, capital, gross receipts, sales, excise, petroleum and gas revenue, value added, goods and services, use, franchise, profits or property taxes, fees, assessments or charges imposed in accordance with Applicable Law and includes penalties, interest and fines with respect thereto.

"Tax Act" means the Income Tax Act (Canada), including any amendments proposed hereto in any public pronouncement by the Department of Finance of the Government of Canada.

"Tax Pools" means the aggregate of undepreciated capital cost, cumulative Canadian exploration expenses, cumulative Canadian development expenses and Canadian oil and gas property expenses of Leland Energy, all as determined in accordance with the Tax Act and calculated immediately following the Effective Date as if Leland Energy had a taxation year end on the Effective Date and used such pools to the extent available to eliminate any income tax payable in respect of such year.

"Tax Pool Value Calculation Example" means the methodology used for calculating tax pool values as used in the example provided in Schedule 2.6.

"Tax Returns" means all returns, prescribed election forms, declarations and reports and information returns and statements required to be filed (taking into account any extension of time to file or send granted to or obtained by any such filing entity) by Leland Energy under Applicable Law related to tax or in respect of any tax, for any period including or ending on or before the Closing Date.

"Title and Operating Documents" means, in respect of any Petroleum and Natural Gas Rights, Tangibles, or Surface Rights, (i) all of the agreements, contracts, instruments and other documents (including the Leases and all other leases, reservations, permits, licences of all sorts, exploration agreements, operating agreements, unit agreements, pooling agreements, assignments, trust declarations or other agreements to recognize Leland Energy's interests, participation agreements, farmin or farmout agreements, royalty agreements, purchase agreements and transfers, (A) gas, oil, condensate and other production sale contracts, (B) gathering, common stream, extraction, transportation, refining and processing agreements, (C) agreements for the construction, ownership and/or operation of Tangibles) by virtue of which such Petroleum and Natural Gas Rights or Tangibles were acquired or constructed or are held or pursuant to which the construction, ownership, operation, exploration, exploitation, extraction, development, production, transportation, refining or marketing of such Petroleum and Natural Gas Rights, Tangibles or Petroleum Substances are subject or which grant rights which are or may be used by the Person in connection therewith, and (ii) the rights (except for Petroleum and Natural Gas Rights) granted under or created by such agreements, contracts, instruments and other documents; but only if the foregoing pertain in whole or part to Petroleum Substances within, upon or under the Lands.

"Vendor's Counsel" means Blake, Cassels & Graydon LLP, Calgary.

"Vendor's Representative" has the meaning ascribed to it in Section 5.5.

"Waterous Arrangement" means all arrangements between Leland Energy and Waterous Securities Inc., including the Agreement between the Vendor and Waterous Securities Inc. evidenced by the invoice attached hereto as Schedule 1.2(d).

“Watford Share Purchase Agreement” dated August 10, 2001 among  Brian E. Hiebert, Guy C. Grierson, Ian R. de Bie, Gordon A. Maybee, Erin Hiebert, Raylene Grierson, Kathleen de Bie and Patricia Maybee, as Vendors and the Purchaser, as Purchaser.

"Wells" means all producing, suspended, shut-in, abandoned, water source disposal or injection wells located on the Lands or any lands pooled or unitized therewith, including the wells listed in the Land Schedule.

1.2        Schedules

The following Schedules are attached hereto and made part of this Agreement:

(a)	Schedule 1.2(a)	Land Schedule
(b)	Schedule 1.2(b)	Effective Date Balance Sheet
(c)	Schedule 1.2(c)	Financial Statements
(d)	Schedule 1.2(d)	Waterous Arrangement
(e)	Schedule 1.2(e)	Penalties and Forfeitures, Preferential Rights and Pooling and Unitization Agreements and Plans other than those Included in Title and Operating Documents
(f)	Schedule 1.2(l)	Escrow Agreement
(g)	Schedule 1.2(m)	Confidentiality Agreement
(h)	Schedule 2.5	Tax Pool Value Calculation Example
(i)	Schedule 3.2(a)(ix)	Form of Opinion of Vendor's Counsel
(j)	Schedule 3.2(c)	Form of Release
(k)	Schedule 4.2(c)	Policies of Insurance
(l)	Schedule 4.3(h)	Other Contracts or Commitments
(m)	Schedule 4.6	Existing Authorizations for Expenditure
(n)	Schedule 4.7	Certain Bonuses
(o)	Schedule 5.1(gg)	Environmental Disclosure
(p)	Schedule 5.1(m)	Current Employees
(q)	Schedule 5.1(s)	Taxes
(r)	Schedule 5.1(y)	Certain Contracts, Agreements, Plans and Commitments
(s)	Schedule 5.1(bb)	AMIs
(t)	Schedule 5.1(ff)	Production Sales Agreements

1.3        References and Headings

The references "hereunder", "herein" and "hereof" refer to the provisions of this Agreement, and references to Article, Sections and Schedules herein refer to articles, sections, or subsections or Schedules of this Agreement. Any reference to time shall refer to Mountain Standard Time or Mountain Daylight Saving Time during the respective intervals in which each is in force in the Province of Alberta.  The headings of the Articles, Sections, Schedules and any other headings, captions or indices herein are inserted for convenience of reference only and shall not be used in any way in construing or interpreting any provision hereof.

1.4        Singular/Plural; Derivatives

Whenever the singular or masculine or neuter is used in this Agreement or in the Schedules, it shall be interpreted as meaning the plural or feminine or body politic or corporate, and vice versa, as the context requires.  Where a term is defined herein, a capitalized derivative of such term shall have a corresponding meaning unless the context otherwise requires.

1.5        Statutory References

Any specific reference to a statute shall include and shall be deemed to be a reference to such statute and to the regulations made pursuant thereto, and all amendments made thereto and enforced from time to time, and to any statute or regulation that may be passed which has the effect of supplementing the statute so referred to or the regulations made pursuant thereto.

1.6        Conflicts

If there is any conflict or inconsistency between a provision of the body of this Agreement and that of a Schedule, the provision of the body of this Agreement shall prevail.

1.7        Accounting References

Subject to Section 1.8, where the character or amount of any asset or liability or item of income or expense is required to be determined, or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be done in accordance with GAAP except where the application of such principles is inconsistent with, or limited by, the terms of this Agreement.

1.8        Preparation of Effective Date Balance Sheet and Financial Statements

The Parties acknowledge that the Effective Date Balance Sheet and the Financial Statements have not been prepared in accordance with GAAP and that they instead have been prepared for Canadian Income Tax purposes; provided that the assets shown include all assets required to be shown for a GAAP presentation except that the oil and gas assets and reserves are not recorded in accordance with GAAP and the liabilities shown thereon include all liabilities required to be shown for a GAAP presentation except any deferred taxes as that term is defined under GAAP.

1.9        Vendor's Knowledge

Where in this Agreement, or in any certificate or document delivered in connection herewith or to effect any of the transactions contemplated hereby, any statement, representation or warranty is made as to, or as being based on, the awareness, knowledge, information or belief of the Vendor, such awareness, knowledge, information or belief, as applicable, is limited to the actual knowledge of George B. Kaiser, Brian E. Hiebert, Guy C. Grierson, Ian R. de Bie and Gordon A. Maybee.

1.10     Purchaser's Knowledge

Where in this Agreement, or in any certificate or document delivered in connection herewith or to effect any of the transactions contemplated hereby, any statement, representation or warranty is made as to, or as being based on, the awareness, knowledge, information or belief of the Purchaser, such awareness, knowledge, information or belief, as applicable, is limited to the actual knowledge of John Fox, Fred Witsell, Grant Carnie, Gerry Tywoniuk and Michael Hull.

ARTICLE 2
PURCHASE AND SALE OF LELAND ENERGY SHARES

2.1        Purchase and Sale of Leland Energy Shares

Upon the terms and subject to the conditions of this Agreement, the Vendor agrees to sell all of the Leland Energy Shares to the Purchaser and the Purchaser agrees to purchase all of the Leland Energy Shares from the Vendor.

2.2        Purchase Price and Allocation of Purchase Price

Subject to adjustment in accordance with the terms and conditions of this Agreement, the aggregate consideration to be paid by the Purchaser to the Vendor shall be THIRTY-THREE MILLION FIVE HUNDRED SIXTY FIVE THOUSAND NINE HUNDRED AND SEVENTY FOUR ($33,565,974.00) Dollars.

2.3        Incremental Adjustment to Purchase Price

The Purchaser shall pay, in addition to the Purchase Price, an incremental amount to the Vendor, calculated on a daily basis from and including June 1, 2001 to and including the earlier of the Closing Date and August 15, 2001, by multiplying the Interest Rate (expressed as a decimal number) by the amount of the Closing Funds and the number of days during such period and dividing the product obtained thereby by 365.

2.4        Deposit

Concurrent with the execution and delivery of this Agreement, the Purchaser shall pay the Deposit to the Vendor's Counsel, who shall invest the Deposit in an interest bearing trust account until Closing. The Deposit and any interest ("Deposit Interest") earned thereon shall be paid to the Party ultimately entitled to the Deposit pursuant to Section 8.3.  The Purchase Price, less the Deposit together with Deposit Interest earned on the Deposit to and including the Closing Date, is herein referred to as the "Closing Funds".

2.5        Adjustments to Purchase Price

(a)         Calculation of Adjustment at Closing:  The Purchase Price shall be increased or decreased on a dollar for dollar basis by the amount by which the Adjusted Working Capital is greater or less than "nil".  If the Adjusted Working Capital:

(i)          exceeds "nil", then the Purchase Price shall be increased by the amount of such excess and the Purchaser shall pay the amount of such excess to the Vendor; or

(ii)         is less than "nil", then the Purchase Price shall be reduced by the amount of such shortfall and the Vendor shall pay the amount of such shortfall to the Purchaser.

(b)        Calculation of Adjustment after Closing:  The adjustments to the Purchase Price shall be calculated and paid on the Closing Date, as provided in Section 2.5(a) based on the Effective Date Balance Sheet, which is attached as Schedule 1.2(c). The adjustments to the Purchase Price shall be recalculated and paid based on the final Effective Date Balance Sheet as contemplated in Section 2.5(f).  Any amounts payable by the Purchaser or the Vendor, as applicable, based on the final Effective Date Balance Sheet shall be adjusted to give credit for adjustments paid on the Closing Date pursuant to Section 2.3(a) and any payment due to the Purchase by the Vendors pursuant to this Section 2.5 shall be first paid from the Escrow Amount pursuant to the Escrow Agreement.

(c)         Effective Date Balance Sheet:

(i)          The Effective Date Balance Sheet (which is unaudited) shall be used by the Vendor and Purchaser for the purposes of initially determining the Adjusted Working Capital as at the Closing Date, subject to the adjustments after the Closing Date in accordance with the remaining provisions of this Section 2.5.

(ii)         No later than 75 days after the Closing Date, the Purchaser shall cause the Accounting Firm to prepare and deliver to the Purchaser and the Vendor the final Effective Date Balance Sheet (which shall be audited).  The Purchaser and Vendor shall provide, or cause to be provided, to the Vendor and the Accounting Firm and their agents full (but non-exclusive) access to the relevant records of Leland Energy to aid in the preparation of such balance sheet.

(d)        Vendor's Objections:  If the Vendor believes that any change is required to be made to the final Effective Date Balance Sheet as prepared by the Accounting Firm, it shall, on or before that date (the "Objection Date") which is 7 days after the delivery of the final Effective Date Balance Sheet by the Accounting firm pursuant to Section 2.5(c)(ii), give written notice of any such proposed change, including the reason for such change, to the Purchaser.  In the event that the Vendor does not notify the Purchaser of any proposed change on or before the Objection Date, then the Vendor shall be deemed to have accepted the final Effective Date Balance Sheet.

(e)         Settlement by Arbitrator:  If the Vendor gives written notice of any proposed change on or before the Objection Date or in the event that the Accounting Firm cannot or will not prepare the final Effective Date Balance Sheet in the manner provided above, the Purchaser and the Vendor shall refer the matter of the proposed change requested by the Vendor or of preparing the final Effective Date Balance Sheet, as the case may be, to Arthur Andersen (the "Arbitrator") to arbitrate the dispute as a single arbitrator in accordance with the Arbitration Act (Alberta) within 60 days after the Objection Date.  If Arthur Andersen declines to serve as the Arbitrator and agreement cannot be reached between the Vendor and the Purchaser as to the Arbitrator, a judge of the Court of Queen's Bench (Calgary) shall select either the Purchaser's or Vendor's designate.  The decision of the Arbitrator with respect to any matter in dispute (including as to all procedural matters) shall be final and binding on the Vendor and the Purchaser and shall not be subject to appeal by either Party.  The fees and expenses of the Arbitrator shall be shared, one half to the Purchaser and one half to the Vendor.

(f)         Final Effective Date Balance Sheet:  Payment of any adjustment in the Purchase Price as a result of any change between the Effective Date Balance Sheet and the final Effective Date Balance Sheet shall be made to the Vendor or the Purchaser, as the case may be, together with interest at the rate specified in Section 2.6 calculated from the Closing Date to the date of payment, within 10 Business Days after the delivery of the final Effective Date Balance Sheet, pursuant to Section 2.5(c)(ii) or Section 2.5(e), as applicable.

(g)        Post-Closing Adjustments re: Tax Pools:  The Purchase Price shall be adjusted on a post-Closing basis:

(i)          in favour of the Purchaser, if it is determined that the Tax Pools were less than $7,782,245 or if Tax Pools are re-assessed or re-determined by the relevant taxation authority to an amount less than $7,782,245;

(ii)         in favour of the Vendor, if it is determined that the Tax Pools were in excess of $7,782,245 or if the Tax Pools of Leland Energy are re-assessed or re-determined by the relevant taxation authority to an amount in excess of $7,782,245;

PROVIDED FURTHER THAT:

(iii)        any such adjustment contemplated in this section 2.5(g) shall be calculated by using the method demonstrated in the Tax pool value calculation example; and

(iv)       any such adjustment to the Purchase Price shall be effected pursuant to the following procedure:

(A)       after Closing, any Party may deliver a notice to the other Party requesting an adjustment to the Purchase Price in accordance with Section 2.5(g) (a “Tax Pool Adjustment Notice”);

(B)        a Tax Pool Adjustment Notice shall include, at a minimum:

(i)          the amount of the Purchase Price adjustment being requested;

(ii)         a summary of the reasons for the requested Purchase Price adjustment including whether the requested Purchase Price adjustment is a result of a miscalculation of the Tax Pools referenced in Section 2.5(g)(i) and 2.5(g)(ii) or if the requested Purchase Price adjustment is a result of a reassessment or re-determination of the Tax Pools by the relevant taxation authority along with details of such reassessment or re-determination; and

(iii)        a calculation of the requested Purchase Price adjustment in accordance with the Tax Pool Value Calculation Example.

(C)        in the event that the Party receiving a Tax Pool Adjustment Notice agrees with the requested Purchase Price adjustment as set forth in the Tax Pool Adjustment Notice, it shall pay the requested Purchase Price adjustment to the other Party within 60 days of the date it receives the Tax Pool Adjustment Notice;

(D)        in the event that the Party receiving the Tax Pool Adjustment Notice disagrees with the requested Purchase Price adjustment it shall, on or before that date (the “Tax Pool Objection Date”), within 14 days after the delivery of the Tax Pool Adjustment Notice, give written notice of its objection to the requested Purchase Price adjustment to the other Party.  In the event that the Party receiving the Tax Pool Adjustment Notice does not notify the other Party of its objections on or before the Tax Pool Objective Date, it shall be deemed to have accepted the requested Purchase Price adjustment; and

(E)        if the party receiving the Tax Pool Adjustment Notice gives written notice of its objection to the requested Purchase Price adjustment on or before the Tax Pool Objection Date in the matter provided above, the Parties shall refer the matter of the requested Purchase Price change to the Arbitrator to arbitrate the dispute as a single Arbitrator in accordance with the Arbitration Act (Alberta) within 60 days after the Tax Pool Objection Date.  If Arthur Andersen declines to serve as the Arbitrator for this purpose, and agreement cannot be reached between the Vendor and the Purchaser as to the Arbitrator, a judge of the Court of Queen’s Bench (Calgary) shall select either the Purchaser’s or the Vendor’s designate.  The decision of the Arbitrator with respect to any matter in dispute (including as to all procedural matters) shall be final and binding on the Parties and shall not be subject to appeal by either Party.  The fees and expenses of the Arbitrator shall be shared, one half to the Purchaser and one half to the Vendor.

2.6        Interest Accrues on Amounts Owing

Any amount owing to a Party by another Party pursuant to any provision of this Agreement after Closing and remaining unpaid shall bear interest calculated daily and not compounded, from the day such amount was due to be paid until the day such amount was paid, at the Interest Rate regardless of whether such Party has given the other Party prior notice of the accrual of interest hereunder.

2.7        Manner of Payment

Unless otherwise specified, all payments made pursuant hereto shall be made by certified cheque, bank draft or wire transfer in immediately available funds.  Payment of the Purchase Price (less any amount pursuant to Section 3.3) by the Purchaser to the Vendor shall be paid to the Vendor’s counsel in trust for the Vendor and any other payment required to be made by the Purchaser to the Vendor shall be made directly to the Vendor.

ARTICLE 3
CLOSING

3.1        Place and Closing Time

Unless otherwise agreed in writing by the Parties, Closing shall take place at the Closing Time at the Place of Closing on the Closing Date.

3.2        Deliveries at Closing

(a)         Vendor's Deliveries to Purchaser:

At Closing, the Vendor shall deliver or shall cause to be delivered the following to the Purchaser:

(i)          certificates representing the Leland Energy Shares, accompanied by stock transfer powers duly executed in blank or duly executed instruments of transfer, and any other documents necessary to transfer to the Purchaser title to the Leland Energy Shares;

(ii)         original share books, share ledgers, minute books and corporate seals of Leland Energy;

(iii)        all books, records, files, reports, data and documents pertaining to Leland Energy and in the possession or control of the Vendor, including any related to (A) the PNG Assets described in items (i), (iii), (v) and (vi) of the definitions of Miscellaneous Interests, and (B) the Title and Operating Documents.

(iv)       a certified copy of resolutions of the board of directors of Leland Energy authorizing the transfer of the Leland Energy Shares from the Vendor to the Purchaser as contemplated by this Agreement;

(v)        resignations or terminations of all directors and officers of Leland Energy;

(vi)       a release from the Vendor of Leland Energy of and from any indebtedness, obligation or liability owed Leland Energy to the Vendor, including in respect of Shareholder Debt save and except for such indebtedness which may be or become payable to the Vendor pursuant to this Agreement.

(vii)      the certificates and other documents required by Section 7.1;

(viii)     a receipt for the Purchase Price;

(ix)        a legal opinion of Vendor's counsel, or such other counsel as appropriate, substantially in the form as attached hereto as Schedule 3.2(a)(ix); and

(x)         such other documents reasonably required to be delivered by the Vendor at the Closing pursuant to this Agreement.

(b)        Purchaser Deliveries to the Vendor:

At Closing, the Purchaser shall deliver, or cause to be delivered, the following to the Vendor:

(i)          the Closing Funds (as defined in Section 2.6) by way of payment to the Vendor's Counsel in trust for the Vendor as set forth in Section 2.2;

(ii)         the certificates and other documents required by Section 7.2; and

(iii)        such other documents as may be reasonably required to be delivered by the Purchaser at Closing pursuant to this Agreement.

(c)         Deliveries by Leland Energy to the Vendor

At Closing, the Purchaser, as shareholder of Leland Energy, shall deliver to the Vendor a release, in the form of Schedule 3.2(c) of the Vendor, its Affiliates and those Persons who are their nominees to the board of directors of Leland Energy of and from all indebtedness, liability and obligations owed by the Vendor, its Affiliates or those Persons who are its nominees to the board of directors of Leland Energy.

3.3        Escrow of Funds

In order to secure funds required to cover the differences in the adjustments to the Purchase Price determined through the use of the Effective Date Balance Sheet and the adjustments determined after Closing pursuant to Section 2.5, and to pay the indemnity described in Article 10, after the Closing Date, subject to the terms and conditions of this Section 3.3, after the Closing Date, Purchaser's Counsel (the "Escrow Agent") shall hold in trust the sum of One Million ($1,000,000) Dollars, plus any interest earned thereon (collectively the "Escrow Amount"), from the Closing Funds paid at Closing.  The Escrow Amount shall be held and released by the Escrow Agent in accordance with the Escrow Agreement  To the extent that the Escrow Amount is not sufficient to cover amounts owing to the Purchaser under the Agreement, the Purchaser shall be entitled to recover such amounts from the Vendor in accordance with the terms of this Agreement.  This Section 3.3 shall not in any way limit the rights and remedies of the Purchaser under this Agreement, and the Purchaser may proceed directly against the Vendor in accordance with this Agreement without first claiming against the Escrow Amount.

ARTICLE 4
INTERIM PERIOD

4.1        Access

The Vendor, directly or indirectly through Leland Energy, will cause Leland Energy to furnish to the Purchaser and its authorized representatives reasonable access during the Interim Period, during the normal business hours, to the properties, books and records (including the PNG Assets) and will cause Leland Energy directly or indirectly, to furnish to the Purchaser and its authorized representatives such additional financial and operating data and other information as the Purchaser may reasonably request.

4.2        Maintenance of Business and PNG Assets

Except as contemplated herein or as otherwise consented to by the Purchaser in writing during the Interim Period (which consent shall not be unreasonably withheld) and subject to Section 4.6, the Vendor directly, or indirectly through Leland Energy shall cause Leland Energy to use all reasonable efforts (having regard to the terms and provisions of the Title and Operating Documents and to the nature of the relevant interest in the PNG Assets) to:

(a)         conduct its activities and operations in the ordinary and usual course of its business;

(b)        operate and maintain the PNG Assets in a proper and prudent manner in accordance with generally accepted oil and gas industry practices, the Title and Operating Documents and Applicable Law; and

(c)         maintain the insurance set forth in Schedule 4.2(c) in force with respect to the PNG Assets.

4.3        Certain Changes Restricted

Except as contemplated herein and subject to Sections 4.6 and 4.7, without first obtaining the written consent of the Purchaser (which consent will not be unreasonably withheld), during the Interim Period, the Vendor, directly or indirectly through Leland Energy shall ensure that Leland Energy does not:

(a)         declare, set aside or pay any dividends, or make any distributions in respect of any Shares or Share Rights, or repurchase, redeem or otherwise acquire any Shares or Share Rights;

(b)        subject to Section 4.3(a), make any payments to the Vendor, or any Affiliate of the Vendor or any other Person in which the Vendor or any of its Affiliates owns any equity securities or ownership interests (other than any repayment of Shareholder Debt and the bonuses shown on the Effective Date Balance Sheet);

(c)         incur any additional Shareholder Debt;

(d)        incur, assume or otherwise become liable for any obligations, debts or charges to the Vendor, or any Affiliate of the Vendor, other than for bona fide advances or payments made to or for the benefit Leland Energy in the ordinary course of business and consistent with past practice;

(e)         amalgamate with, merge into or with or otherwise consolidate with any other corporation or acquire all or substantially all of the business or assets of any Person;

(f)         make any change in its constating documents or by–laws;

(g)        purchase any securities of any Person except short–term investments made in the ordinary course of business;

(h)        other than pursuant to existing contracts or commitments existing as of the Signing Date as set forth in Schedule 4.3(h), sell, lease or otherwise dispose of any of its PNG Assets (the extraction and sale of petroleum and natural gas and the consumption or other disposition of its assets and properties in the ordinary course of business being excepted);

(i)          other than in the ordinary course of business, purchase, lease or otherwise acquire any interest in petroleum or natural gas, real property or real property interests; or

(j)          grant a Security Interest, other than a Permitted Encumbrance.

(k)         issue any Shares or Share Rights;

(l)          incur any capital expenditures, except in accordance with Section 4.4; or

(m)        except in connection with the transactions contemplated herein, enter into any agreement or commitment to do any of the foregoing items (a) to (m).

4.4        Dealings or Operations re PNG Assets

Except in an emergency in order to prevent loss of life, injury to persons or damage to or loss of property and subject to Section 4.6, during the Interim Period the Vendor, shall not permit Leland Energy, without the prior written consent of the Purchaser (which consent shall not be unreasonably withheld), to:

(a)         voluntarily assume any obligation or commitment with respect to the PNG Assets where Leland Energy's share of the expenditure associated with such obligation or commitment exceeds $25,000;

(b)        surrender or abandon any of the PNG Assets other than in the ordinary course of business;

(c)         amend or terminate any material contracts or agreements applicable to the PNG Assets except as disclosed to the Purchaser prior to Closing;

(d)        propose or initiate the exercise of any right (including bidding rights at Crown sales, rights under area of mutual interest provisions and rights of first refusal) or option relative to, or arising as a result of the ownership of, any of the PNG Assets, or propose or initiate any operations on the Lands which have not commenced or have not been committed to by Leland Energy as of the Signing Date, if such exercise or option would result in either an obligation of Leland Energy after the Signing Date in aggregate in excess of $25,000 or a material adverse effect on the value of any of the PNG Assets; or

(e)         resign, or take any action which would result in its resignation or replacement, as operator of any of the Lands or the Petroleum and Natural Gas Rights.

If the Vendor or Leland Energy reasonably determines that any such expenditures or actions are necessary to prevent loss of life or injury to persons, damage to or loss of property, the Vendor shall give prompt notice to the Purchaser of such expenditures or actions and the Vendor's or Leland Energy's, as applicable, estimate of the costs and expenses expended or to be expended in connection therewith.

4.5        Proposals for Dealings or Operations re PNG Assets

Subject to Section 4.6, if the Leland Energy receives notice of proposed operations, or the exercise of any right or option, respecting the PNG Assets from a third party during the Interim Period in circumstances in which such operation or the exercise of such right or option would require the consent of the Purchaser pursuant to Sections 4.3 or 4.4, the following paragraphs shall apply to such operation or the exercise of such right or option (each a "Proposal"):

(a)         The Vendor, directly or indirectly through Leland Energy, as applicable, shall give prompt notice of the Proposal to the Purchaser, including with such notice the particulars of such Proposal in reasonable detail, and whether the Vendor or Leland Energy, as applicable, recommends the exercise of its rights with respect to the Proposal.

(b)        The Purchaser shall, not later than 4 Business Days prior to the time the Vendor or Leland Energy as applicable, is required to make its election with respect to the Proposal (the "Election Time"), advise the Vendor or Leland Energy, as applicable, by written notice, whether it wishes the Vendor or Leland Energy, as applicable, to exercise its rights with respect to the Proposal, provided that failure of the Purchaser to provide such notice within such period shall be deemed to be an election by the Purchaser to have the Vendor or Leland Energy, as applicable, proceed with its recommendation with respect to the Proposal as specified in the notice delivered pursuant to Section 4.5(a).

(c)         If the Vendor agrees with the proposed response to the Proposal requested by the Purchaser, the Vendor shall cause Leland Energy, to make the election requested by the Purchaser with respect to the Proposal within the period during which Leland Energy may respond to the Proposal.

(d)        If the Vendor disagrees with the proposed response to the Proposal requested by the Purchaser, the Vendor and the Purchaser shall meet at least 2 Business Days prior to the Election Time to discuss their differences.  If consensus is not reached at that meeting, or if the Purchaser refuses to attend the meeting, the Vendor shall have the unilateral right to determine the response of Leland Energy to the Proposal and such response shall be binding on the Purchaser.

(e)         A request by the Purchaser not to consent to any Proposal required to preserve the existence of any of the PNG Assets shall not entitle the Purchaser to any reduction of the Purchase Price in the event that Leland Energy’s interest therein is terminated or reduced as a result thereof, and such termination or reduction shall be deemed to be a Permitted Defect and shall not constitute a failure of the Vendor's representations and warranties pertaining to such PNG Assets.

4.6        Existing Authorizations for Expenditure

Notwithstanding the preceding provisions of this Article 4, Leland Energy shall be entitled to conduct those activities and operations arising out of or incidental to the authorizations for expenditures listed in Schedule 4.6.

4.7        Certain Bonuses and Dividends

Notwithstanding the preceding provisions of this Article 4:

(a)         Leland Energy shall be permitted to issue certain bonuses to the individuals listed in Schedule 4.7 in the amounts as set forth in Schedule 4.7 which bonuses have been accrued and noted in the Effective Date Balance Sheet and is therefore accounted for in Adjusted Working Capital.  Such employment bonuses shall be issued by Leland Energy before Closing; and

(b)        Leland Energy shall be permitted to declare a dividend in the amount of $2,389,142 which dividend shall not result in an adjustment to the Purchase Price.

4.8        Prohibited Negotiations

Except in connection with the sale of the Leland Energy Shares to the Purchaser pursuant hereto or as otherwise consented to by the Purchaser in writing, until the earlier of the expiry of the Interim Period or the termination of this Agreement in accordance with the terms hereof, the Vendor shall ensure that neither the Vendor nor any of their Affiliates, nor any of their respective agents and representatives, shall:

(a)         have any further negotiations with other potential purchasers of all or any portion of the Leland Energy Shares, or all or substantially all the PNG Assets and shall not directly or indirectly initiate, solicit, encourage or accept any other offer or proposal by any Person other than the Purchaser for the purchase or acquisition of all or any portion of the Leland Energy Shares or all or substantially all the PNG Assets; and

(b)        provide information concerning Leland Energy's operations, finances, securities, assets or other business or affairs to any Person in furtherance of any matter pursuant to Section 4.7(a) or in furtherance of any contemplated corporate acquisition or merger.

4.9        Insurance

Until the Closing Date, the Vendor shall maintain, or cause the Leland Energy to maintain, policies of insurance and surety bonds in effect at the Signing Date that provide coverage in favour of Leland Energy, as set forth in Schedule 4.2(c).

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARTIES

5.1        Vendor's Representations and Warranties

The Vendor represents and warrants to the Purchaser, as of the Signing Date and the Closing Date, or such other date as is specifically referred to in this Section 5.1, acknowledging that the Purchaser is relying upon the same in entering into this Agreement that:

(a)         Standing of Leland Energy: Leland Energy:

(i)          is duly organized or continued and validly existing under the laws of its respective governing jurisdiction;

(ii)         has all necessary corporate power and authority to own or lease its properties and assets and to carry on its business as now being conducted by it; and

(iii)        is duly qualified to own or lease its properties and assets and to carry on its business and is up to date with all of its filings required to be made in each jurisdiction in which the nature of the business conducted by it or the character of the properties and assets owned or leased by it makes such qualification necessary.

(b)        Requisite Authority:  The Vendor has the requisite capacity, power and authority to execute this Agreement and the other agreements and documents required to be delivered by it pursuant hereto and to perform the obligations to which it thereby becomes subject.

(c)         Authorization and Enforceability:

(i)          The Vendor has taken all necessary actions to authorize the execution, delivery and performance of this Agreement, and the other agreements and documents required to be delivered by it pursuant hereto, including the sale of the Leland Energy Shares to the Purchaser in accordance with the provisions of this Agreement.  This Agreement has been duly executed and delivered by the Vendor, and this Agreement constitutes, and all other documents executed and delivered on behalf of the Vendor pursuant hereto shall when executed and delivered constitute, valid and binding obligations of the Vendor enforceable in accordance with their respective terms and conditions, subject to the qualification that such enforceability may be subject to (i) bankruptcy, insolvency, fraudulent preference, reorganization or other laws affecting creditors' rights generally, and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding at equity or law).

(ii)         Leland Energy at Closing shall have taken all necessary corporate action to authorize the transfer and assignment of the Leland Energy Shares to the Purchaser in accordance with the provisions of this Agreement.

(d)        No Conflict - Vendor:  The execution and delivery of this Agreement, and the other agreements and documents required to be delivered by the Vendor pursuant hereto, and the completion of the sale of the Leland Energy Shares to the Purchaser in accordance with the terms of this Agreement are not and will not be in violation or breach of, or be in conflict with or require any consent, authorization or approval under:

(i)          any term or provision of the constating documents of the Vendor;

(ii)         any agreement, written or oral to which the Vendor is bound;

(iii)        any permit or other governmental authorization to which the Vendor is bound; or

(iv)       any Applicable Law or any judicial order, award, judgement or decree applicable to the Vendor.

which would be expected to have a material adverse effect on Leland Energy.

(e)         No Conflict – Leland Energy:  The execution and delivery of this Agreement, and the other agreements and documents required to be delivered by the Vendor pursuant hereto, and the completion of the sale of the Leland Energy Shares to the Purchaser in accordance with the terms of this Agreement are not and will not be in violation or breach of, or be in conflict with or require any consent, authorization or approval under:

(i)          any term or provision of the constating documents of Leland Energy;

(ii)         any agreement, written or oral to which Leland Energy is bound;

(iii)        other than the Title and Operating Documents, any permit or other governmental authorization to which Leland Energy is bound; or

(iv)       any Applicable Law or any judicial order, award, judgement or decree applicable to Leland Energy.

which would be expected to have a material adverse effect on Leland Energy.

(f)         Private Companies: Neither the Vendor nor Leland Energy are a "reporting issuer" under relevant securities legislation or a "distributing corporation" under relevant corporate legislation.

(g)        Residency For Tax Purposes:  The Vendor is not a non–resident of Canada within the meaning of the Income Tax Act (Canada).

(h)        Capital of Leland Energy: The Vendor is the beneficial owner, directly or indirectly, of all of the issued and outstanding Shares Leland Energy and no Person other than the Purchaser under this Agreement has any agreement or option or any right capable of becoming an agreement or option for the purchase from the Vendor of any of the Shares of Leland Energy, and no Person has any agreement or option or any right capable of becoming an agreement or option, including convertible securities, warrants or convertible obligations of any nature, for the purchase, subscription or issuance of any unissued Shares of the Leland Energy or of any Share Rights of Leland Energy.

(i)          Authorized and Issued Capital of Leland Energy:  At the Closing Time, the authorized share capital of Leland Energy shall consist of an unlimited number of common shares, of which 20,433 (being the Leland Energy Shares), and no others, shall have been validly issued and shall be outstanding as fully paid and non-assessable shares of Leland Energy, all of which Leland Energy Shares shall be registered in the name of the Vendor and no other shares of Leland Energy shall be outstanding.

(j)          Title to Leland Energy Shares:  At the Closing Time, the Vendor will be the registered and beneficial owner of all of the Leland Energy Shares and will at such time have good and marketable title to such Leland Energy Shares free and clear of all Security Interests except those of the Purchaser arising pursuant to this Agreement.

(k)         Leland Energy Shares:  No Person other than the Purchaser under this Agreement has any agreement or option or any right capable of becoming an agreement or option for the purchase from the Vendor of any of the Leland Energy Shares.

(l)          Options:  No Person has any agreement or option or any right capable of becoming an agreement or option, including convertible securities, warrants or convertible obligations of any nature, for the purchase, subscription or issuance of any unissued Shares of Leland Energy or of any Share Rights of Leland Energy.

(m)        Directors/Officers/Employees:  At the Closing Time Leland Energy is not nor will be a party to any employment, management or consulting agreement or other similar arrangement with its Directors, Officers, employees, consultants or others for which Purchaser or Leland Energy will have any liability after Closing except for non-written agreements between Leland Energy and the individual employees listed in Schedule 5.1(m);

(n)        Books:  The books of account, minute books, share ledgers  and other records of Leland Energy are complete and accurate in all material respects  and have been maintained and will be maintained until Closing in accordance with prudent business practices;

(o)        Financial Condition:  The Financial Statements fairly present the financial condition of the business of Leland Energy as at the date thereof, and where such statements have been audited, they have been prepared in accordance with Section 1.8.  All of the liabilities (actual, contingent or otherwise) that are individually or in the aggregate, material to Leland Energy, taken as a whole on a consolidated basis are disclosed on, reflected in or provided for in the Financial Statements.  Since the respective dates of the Financial Statements, there has been no material adverse change in the financial condition of the business of Leland Energy.  There is no reason to believe that any restatement of the Financial Statements may be required based on any material or contingent claim arising subsequent to the respective dates thereof;

(p)        Financial Statements:  The Financial Statements fairly present the financial position of Leland Energy as at the date thereof, as well as the results of operations and changes in financial position of Leland Energy for the periods covered thereby, as applicable, in accordance with Section 1.8 and the accounting policies set out in the notes to such Financial Statements.

(q)        Applicable Law:  To the knowledge of the Vendor, Leland Energy is in compliance with Applicable Law and has not received or delivered any written notices of non-compliance or alleged non-compliance of any provisions of Applicable Law, non–compliance with which would reasonably be expected to affect materially and adversely the business, financial condition or results of operations of the Leland Energy.

(r)         Lawsuits:  Neither the Vendor nor Leland Energy is a party to any action, suit or other legal, administrative or arbitration proceeding or government investigation, or any claim, including without limitation claims on account of aboriginal title or treaty rights, which might reasonably be expected to result in a material liability or obligation of Leland Energy, or the impairment or loss of the Vendor's interest in the Shares or Leland Energy's interest in the PNG Assets or Leland Energy's interest in the shares of any other Corporation held by it, or any part thereof, and there are no circumstances, matters or things which could reasonably be anticipated to give rise to any such action, suit or other legal, administrative or arbitration proceeding or government investigation or claim;

(s)         Taxes:  Except as set forth in Schedule 5.1(s):

(i)          Leland Energy has filed, or will prior to the Closing file, all Tax Returns required to be filed under Applicable Law prior to Closing;

(ii)         Leland Energy has made complete and accurate disclosure in all Tax Returns filed by Leland Energy and in all materials accompanying such Tax Returns;

(iii)        Leland Energy has paid or accrued all taxes due and payable prior to Closing under Applicable Law;

(iv)       Leland Energy has paid all tax assessments and re-assessments and any penalties, interest, fines, governmental charges and other amounts which the relevant authority is entitled to collect from Leland Energy;

(v)        there are no actions, audits, assessments, reassessments, suits, proceedings, investigations or claims now subsisting against Leland Energy in respect of taxes paid or payable by Leland Energy:

(vi)       there are no matters which are the subject of any agreement with any governmental authority relating to claims for additional taxes from Leland Energy and nor, to the knowledge of the Vendor, are any such matters under discussion with such authorities;

(vii)      there are no agreements, waivers or other arrangements providing for an extension of time with respect to the assessments or reassessment of any tax or the filing of any Tax Returns by, or the payment of any tax by, or levy of any governmental charge against Leland Energy; and

(viii)     Leland Energy has withheld and/or collected from each payment made by it the amount of all taxes and other deductions required to be withheld therefrom and has paid all such amounts due and payable before the date hereof to the proper taxing or other authority within the time prescribed under Applicable Law.

(t)         Title to PNG Assets:  To the knowledge of the Vendor:

(i)          neither the Vendor nor Leland Energy has done any act or thing whereby any of that corporation's interest in and to the PNG Assets may be cancelled or determined and the Vendor is not aware of any other act or thing whereby any interest of Leland Energy in and to the PNG Assets may be cancelled or determined;

(ii)         Leland Energy has not encumbered, granted a Security Interest in or transferred, leased, licensed or otherwise disposed of the PNG Assets or any interest therein, and the Vendor is not aware of any other encumbrance, Security Interest, transfer, license or disposition of the PNG Assets or any interest therein; and

(iii)        the PNG Assets are free and clear of all liens, encumbrances, adverse claims, demands, Security Interests and Royalty Interests created by through or under Leland Energy and the Vendor is not aware of any liens, encumbrances, adverse claims, demands or royalties otherwise created;

except in each case for Permitted Encumbrances.

(u)        Ownership and Condition of Tangibles:  To the knowledge of the Vendor, the Leland Energy is the beneficial owner of the Tangibles and to the knowledge of the Vendor, the Tangibles have been constructed, installed, maintained and operated in accordance with generally accepted engineering practices and good oil and gas industry practices.

(v)        All Necessary Permits: To the knowledge of the Vendor, Leland Energy, or the applicable operator, as the case may be, has obtained all necessary permits, licences and authorizations as may be required pursuant to any Applicable Law to own, construct, operate and maintain the PNG Assets.

(w)        Interim Operations:  Since the Leland Effective Date the PNG Assets have been operated only in the ordinary and normal course of business.

(x)         No Reduction:  To the knowledge of the Vendor and other than as disclosed on the Land Schedule, the interests of Leland Energy in the PNG Assets are not subject either to reduction on account of actions or omissions taken or omitted by them or conversion or subject to change to an interest of any other size, and the interests of Leland Energy are not subject to penalty or forfeiture as a result of non-participation in any joint operation.

(y)        Certain Contracts, Agreements, Plans and Commitments:  Except for Title and Operating Documents, there are no contracts or agreements (written or oral) to which Leland Energy is a party and which is material to Leland Energy, except for those contracts and agreements set forth in  Schedule 5.1(y)and any other schedule attached to this Agreement.

(z)         Title and Operating Documents:  As of the Closing Date, there are no material Title and Operating Documents relating to PNG Assets operated by Leland Energy and to the knowledge of the Vendor there are no material Title and Operating Documents relating to PNG Assets not operated by Leland Energy affecting the Leland Energy's title to the PNG Assets which are in the possession of the Vendor or Leland Energy, other than those which have been or will be made available for inspection by the Purchaser pursuant to Sections 4.1 and 6.1 prior to the Closing Date.

(aa)       Breach of Contracts:  To the knowledge of the Vendor, Leland Energy is not in default under or in breach of any contract, agreement (whether written or oral) indenture or other instrument to which it is a party or by which they are bound, and there exists no set of facts which, after notice or lapse of time or both, would constitute such a default or breach except as such default or breach would not have a material adverse effect upon Leland Energy, and to the knowledge of the Vendor, and subject to and limited by applicable bankruptcy, reorganization, arrangement, winding-up, insolvency, liquidation, moratorium, preference and other laws and judicial decisions from time to time in effect affecting the enforcement of rights and remedies of creditors, all such contracts and agreements are valid, binding and enforceable.

(bb)      AMIs:  There are no area of mutual interest provisions applicable to and binding upon Leland Energy in respect of the PNG Assets or not disclosed to the Purchaser on or before the Signing Date and as set forth on Schedule 5.1(bb).

(cc)       No Hedging Contracts: Except for agreements respecting the firm transportation or the sale of Petroleum Substances which may be cancelled without penalty or liability on notice of not more than 30 days, Leland Energy is not party to, and to the knowledge of the Vendor, is not subject to any contracts or other arrangements in respect of any future transaction or otherwise providing for options, swaps, floors, caps, collars, forward sales, forward purchases or similar hedging or leveraging transactions of, respecting or otherwise affecting the PNG Assets.

(dd)      No Balancing Agreements: Leland Energy is not party to and the knowledge of the Vendor, Leland Energy is not bound by any agreements or arrangements (commonly known as gas balancing, over production or underlift overlift agreements or arrangements) which are among two or more Persons owning interests in a portion of the Lands or lands pooled or unitized therewith under which Leland Energy is subject to any gas imbalance, nor has there been any circumstance or case whereby one of such persons has taken, or may hereafter take, a share of the production of Petroleum Substances from such lands greater than it would otherwise be entitled to by virtue of its interest in such lands and which excess taking entitles the other persons to a credit in respect of subsequent production from such lands by which Leland Energy is bound and which pertain to the PNG Assets.

(ee)       Take or Pay Delivery Obligations and Payments:  There are no Take or Pay Delivery Obligations or Take or Pay Payments.

(ff)        Production Sales Agreements:

(i)          Except as described in Schedule 5.1(ff), there are no production sale agreements or arrangements under which Leland Energy, or any third party acting on behalf of the Leland Energy, is obligated to sell or deliver Petroleum Substances allocable to the Petroleum and Natural Gas Rights, other than contracts which are terminable on not more than thirty (30) days notice.

(ii)         Leland Energy has not received, and to the knowledge of the Vendor, none of Leland Energy's agents or any applicable operator of the PNG Assets has received written notice of any actual or alleged act or omission which does, or would with the passage of time, constitute a material default of the Leland Energy as seller under any of the production sales agreements referred to in Section 5.1(ff) in a manner that would have a material adverse effect upon the rights of Leland Energy thereunder.

(gg)      Environmental Matters: To the knowledge of the Vendor, and except as disclosed in Schedule 5.1(gg);

(i)          Leland Energy or the relevant operator has obtained all permits, licenses and other authorizations which are required under Environmental Law to own or operate the PNG Assets and the failure of which to obtain would have a material adverse effect upon the value or current use or operation of such PNG Assets;

(ii)         Leland Energy is not in violation of and have not materially violated in connection with the ownership, use, maintenance or operation of the PNG Assets, any Environmental Laws;

(iii)        there are no orders or directions relating to environmental matters requiring any remediation, work, repairs, construction or capital expenditures with respect to the PNG Assets of Leland Energy, and no Environmental Damage has occurred on or within the Lands which affects the PNG Assets;

(iv)       no Hazardous Materials have been released into the Environment, or deposited, discharged, placed or disposed of at, on or near the PNG Assets which would be reasonably likely to lead to liability under any Environmental Law; and

(v)        no notices of any violation of any of the matters referred to in this Section 5.1(gg) relating to the PNG Assets or their use have been received by the Leland Energy.

(hh)      No Default Notices: Leland Energy has not received and, to the knowledge of the Vendor, none of its agents or any applicable operator of the PNG Assets has  received any notice of default under the Title and Operating Documents or any notice alleging material default under any other agreement pertaining to any of the PNG Assets, which default has not been rectified as of the Signing Date.

(ii)         Authorized Expenditures:  Except as specifically disclosed in Schedule 4.6 and Schedule 4.7, there are no outstanding authorizations for expenditure or outstanding financial commitments in excess of $50,000 respecting the PNG Assets pursuant to which expenditures are or may be required by the Purchaser as a result of the acquisition of Leland Energy Shares or in respect of which any amount is outstanding in excess of $50,000.

(jj)         No Fees etc.:  Except for any fees payable under the Waterous Arrangement which shall be for the account of the Vendor, no Vendor has incurred any obligation or liability, contingent or otherwise, for brokers' or finders' fees or commissions with respect to the transactions herein for which the Purchaser or Leland Energy shall have any obligation or liability.

(kk)       Insurance:  Schedule 4.2(c) sets forth the policies of insurance and insurity bonds that provide coverage in favour of Leland Energy.

(ll)         Rights of First Refusal:  Except as disclosed on the Land Schedule or the Leland Land Schedule, there is no right of first refusal or other pre-emptive right applicable to the Leland Energy Shares or the PNG Assets, or any of them, whereby any Person (other than the Purchaser pursuant to this Agreement), has, as a result of the entering into of this Agreement by the Parties, a right to purchase the Leland Energy Shares, the PNG Assets or the Leland PNG Assets, or any of them, at a value determined on the basis provided for in the applicable agreement giving that Person a right of first refusal or other pre-emptive rights.

(mm)     Consulting Agreements:  Each of the Consulting Agreements dated April 1, 1999 entered into between Leland Energy Limited Partnership, as amended, has been terminated.

(nn)      Gulf Transaction:  Leland does not have any liability for, nor will it be subject to, any claims arising out of or in any way connected with the Gulf Transaction.

(oo)      Leakage:  Except as contemplated herein and except as accounted for in the Effective Date Balance Sheet, since the date of the Effective date Balance Sheet, Leland Energy has not:

(i)          declared, set aside or paid any dividends, or made any distributions in respect of any Shares or Share Rights, or repurchased, redeemed or otherwise acquired any Shares or Share Rights other than as described in section 4.3(a);

(ii)         made any payments to the Vendor, or any Affiliate of the Vendor or any other Person in which the Vendor or any of its respective Affiliates owned any equity securities or ownership interests (other than any repayment of Shareholder Debt and the bonuses shown on the Effective Date Balance Sheet);

(iii)        incurred any additional Shareholder Debt;

(iv)       incurred, assumed or otherwise became liable for any obligations, debts or charges to, or entered into any agreement or arrangement with or ranted any security interest to, the Vendor, or any Affiliate of the Vendor;

(v)        issued any Shares or Share Rights;

(vi)       amended the terms and conditions of any employment, consulting or similar agreements (written or oral) or arrangements; and

(vii)      entered into any agreement or commitment to do any of the foregoing items (a) to (f).

(pp)      Shareholder Debt: At Closing, Leland Energy shall have no Shareholder Debt, all such Shareholder Debt having been eliminated by the payment of the dividend referred to in Section 4.7(b).

5.2        Purchaser's Representations and Warranties

The Purchaser represents and warrants to the Vendor that:

(a)         Standing: The Purchaser is a corporation, duly organized, validly existing under the laws of its jurisdiction of incorporation, and duly registered, authorized to carry on business in the Province of Alberta.

(b)        Requisite Authority:  The Purchaser has the requisite corporate capacity, power and authority to execute this Agreement and the other agreements and documents required to be delivered hereby and to perform the obligations to which it thereby becomes subject.

(c)         Execution and Enforceability:  The Purchaser has taken all necessary corporate actions to authorize the execution, delivery and performance of this Agreement, including the purchase of the Leland Energy Shares in accordance with the provisions of this Agreement.  This Agreement has been duly executed and delivered by the Purchaser, and this Agreement constitutes, and all other documents executed and delivered on behalf of the Purchaser hereunder shall, when executed and delivered constitute, valid and binding obligations of the Purchaser enforceable against the Purchaser in accordance with their respective terms and conditions, subject to the qualification that such enforceability may be subject to (i) bankruptcy, insolvency, fraudulent preference, reorganization or other laws affecting creditors' rights generally, and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding at equity or law).

(d)        No Conflict:  The execution and delivery of this Agreement, and the other agreements and documents required to be delivered by it pursuant hereto, and the completion of the purchase of the Leland Energy Shares by the Purchaser in accordance with the terms of this Agreement are not and will not be in violation or breach of, or be in conflict with or require any consent, authorization or approval under:

(i)          any term or provision of the constating documents of the Purchaser;

(ii)         any permit or authority to which the Purchaser is a party or by which the Purchaser is bound; or

(iii)        Applicable Law or any judicial order, award, judgement or decree applicable to the Purchaser.

(e)         Litigation:  There are no actions, suits or proceedings pending or, to the knowledge of the Purchaser, threatened against the Purchaser seeking relief which would prevent or materially hinder the consummation of the transactions contemplated by this Agreement.

(f)         Investment Canada Act:  The Purchaser is a non-Canadian within the meaning of the Investment Canada Act (Canada).

(g)        Acting as Principal:  The Purchaser is purchasing the Leland Energy Shares as principal.

(h)        No Fees etc.:  The Purchaser has not incurred any obligation or liability, contingent or otherwise, for brokers' or finders' fees or commissions with respect to the transactions herein for which the Vendor shall have any obligation or liability.

(i)          Representations and Warranties of the Vendor:  The Purchaser has no knowledge of any fact, matter or circumstance that, individually or in the aggregate would render any of the representations or warranties of the Vendor contained in Section 5.1 untrue or inaccuarate in any material respect.

5.3        Survival of Representations and Warranties

Each Party acknowledges that the other may, subject to Article 10, rely on the representations and warranties made by such Party pursuant to Sections 5.1 or 5.2 as the case may be.  The representations and warranties in Sections 5.1 and 5.2 shall be true on the Signing Date and on the Closing Date, and such representations and warranties shall continue in full force and effect and shall survive the Closing Date for the Survival Period applicable thereto for the benefit of the Party for which such representations and warranties were made.

5.4        Survival of Representations and Warranties re Tax

Notwithstanding Section 5.3, the Vendor acknowledges that the Purchaser may, subject to Article 10, rely on the representation and warranty made by the Vendor pursuant to Section 5.1(s).  The representation and warranty in Section 5.1(s) shall be true on the Signing Date and on the Closing Date, and such representation and warranty shall continue in full force and effect and shall survive the Closing Date for the entire re-assessment period set forth in the Tax Act for the benefit of the Purchaser.

5.5        No Additional Representations Or Warranties By Vendor

Except as and to the extent set forth in Section 5.1, the Vendor make no representations or warranties whatsoever, and disclaims all liability and responsibility for any representation, warranty, statement or information made or communicated (orally or in writing) to the Purchaser (including any opinion, information or advice which may have been provided to the Purchaser by any officer, shareholder, director, employee, agent, consultant or representative of the Vendor, Affiliates of the Vendor, Waterous Securities Inc., the Vendor's Counsel or any other agent, consultant, representative or Person, collectively referred to as the "Vendor's Representatives").  Without limiting the generality of the foregoing, except as and to the extent, if any, set forth in Section 5.1, the Vendor makes no representations or warranties as to:

(a)         title to Leland Energy's interests in any properties or assets, including the PNG Assets;

(b)        the quantity, quality or recoverability of Petroleum Substances respecting the Lands;

(c)         any estimates of the value of the PNG Assets, or the revenues applicable to future production from the Lands;

(d)        any engineering, geological, environmental or other interpretations or economic evaluations respecting the PNG Assets;

(e)         the rates of production of Petroleum Substances from the Lands;

(f)         the quality, condition or serviceability of the PNG Assets;

(g)        the suitability of any of the PNG Assets for use for any purpose; or

(h)        any information provided or made available to the Purchaser by the Vendor, or the Vendor's Representatives including the Title and Operating Documents, the Financial Statements, any engineering report or update, books, accounts, records, minute books, Tax Returns and filings and other information and documents of Leland Energy and the Vendor.

5.6        No Merger

The representations and warranties in Sections 5.1 and 5.2 shall be deemed to apply to all transfers, assignments and other documents conveying any of the Leland Energy Shares from the Vendor to the Purchaser.  Until the end of the Survival Period applicable thereto, and in the case of the representation and warranty in Section 5.1(s), such period indicated in Section 5.4, there shall not be any merger of any of such representations or warranties in such assignments, transfers or other documents, notwithstanding any rule of law, equity or statute to the contrary, and all such rules are hereby waived.

ARTICLE 6
ACCESS TO PNG ASSETS

6.1        Vendor To Provide Access to PNG Assets

The access afforded to the Purchaser and its representatives pursuant to Section 4.1 shall include:

(a)         access to records, files, reports, data and documents in Calgary, Alberta, directly or indirectly relating to the PNG Assets, during normal business hours, for the purpose of the Purchaser's review of the PNG Assets and the title of Leland Energy thereto and investigation of the business and condition (financial or otherwise) of Leland Energy, including:

(i)          all operating, technical, financial and environmental data and information, including Leland Energy's minute book, books of account, tax records and technology; and

(ii)         the PNG Assets as respectively described in items (i), (ii), (iii), (v) and (vi) of the definition of Miscellaneous Interests; and

(b)        a reasonable opportunity to conduct a physical inspection of the PNG Assets (including the Wells, Tangibles and surface areas included therein or associated therewith) at the Purchaser's sole cost, risk and expense, insofar as the Vendor can cause, pursuant to the Title and Operating Documents, any third party to reasonably provide such access to the PNG Assets;

provided that access to all such information and data described in this Section 6.1 shall be subject to the restrictions described in Section 4.1.

ARTICLE 7
CONDITIONS TO CLOSING

7.1        Conditions to the Obligations of the Purchaser

The obligation of the Purchaser to complete the purchase of the Leland Energy Shares from the Vendor, is subject to the fulfilment, on or prior to the Closing Date, of the following conditions precedent:

(a)         Representations and Warranties:  All representations and warranties of the Vendor contained in this Agreement shall be true at and as of the Signing Date and the Closing Date as if made then in each case, except for inaccuracies which are not in the aggregate material, and a certificate to that effect from the Vendor shall have been delivered to the Purchaser.

(b)        Covenants and Agreements:  The Vendor shall have complied with and performed in all material respects all covenants and agreements required by this Agreement to be complied with and performed by the Vendor at or prior to the Closing Date and a certificate to that effect from the Vendor shall have been delivered to the Purchaser.

(c)         Shareholder Debt:  There shall be no Shareholder Debt.

(d)        Kaiser Receivable:  All amounts owing by Kaiser Energy Limited or any of its Affiliates to Leland Energy, the Watford Entities, Watford Energy or Amalco (as defined in the Watford Share Purchase Agreement), shall have been paid and collected.

(e)         Merger Agreement:  The Merger Agreement dated effective the 1^st day of April, 1999, as amended, among Leland Energy Ltd., Kaiser Energy Ltd., 808715 Alberta Ltd., 808719 Alberta Ltd., 808721 Alberta Ltd., 831685 Alberta Ltd., Brian Hiebert, Ian de Bie, Guy Grierson, Gord Maybee shall have been terminated with no continuing liability or obligation of Leland Energy thereunder or in connection therewith, and an agreement effecting such termination, in form and substance satisfactory to the Purchaser, shall have been delivered to the Purchaser.

(f)         Closing Deliveries: The Purchaser shall have received delivery of all documents required to be delivered by the Vendor pursuant to Sections 3.2(a).

(g)        Outside Date:  The Closing shall have occurred not later than the Outside Date.

(h)        Watford Sale:  The transaction contemplated by the Share Purchase Agreement dated August 10, 2001 among  Brian E. Hiebert, Guy C. Grierson, Ian R. de Bie, Gordon A. Maybee, Erin Hiebert, Raylene Grierson, Kathleen de Bie and Patricia Maybee, as Vendors and the Purchaser, as Purchaser shall have been concluded.

(i)          No Material Adverse Change:  after having taken into account any material positive change to the PNG Assets and the business, liabilities and financial condition of Leland Energy since the Effective Date to the Closing Date, there shall have been no material adverse change since the Effective Date to the Closing Date to any of the PNG Assets (other than production of Petroleum Substances in the ordinary course) or to the business, liabilities, financial condition of Leland Energy, except for matters and risks which are generally applicable to the oil and gas industry in Canada (including, without limitation, fluctuations in commodity prices and fluctuations in currency or interest rates) and any matter, fact or circumstance disclosed in any schedule attached to this Agreement.

7.2        Conditions to the Obligations of Vendor to Close

The obligation of the Vendor to complete the sale of the Leland Energy Shares to the Purchaser, is subject to the satisfaction at or prior to the Closing Date of the following conditions precedent:

(a)         Representations and Warranties: All representations and warranties of the Purchaser contained in this Agreement shall be true at and as of the Signing Date and the Closing Date as if made then in each case, except for inaccuracies which are not in the aggregate material, and a certificate to that effect from the Purchaser shall have been delivered to the Vendor.

(b)        Covenants and Agreements: The Purchaser shall have complied with and performed in all material respects all covenants and agreements required by this Agreement to be complied with and performed by the Purchaser at or prior to the Closing Date and a certificate to that effect from the Purchaser shall have been delivered to the Vendor.

(c)         Closing Deliveries: The Vendor shall have received delivery of all documents required to be delivered by the Purchaser pursuant to Section 3.2(b).

(d)        Outside Date: The Closing shall have occurred not later than the Outside Date.

7.3        Parties To Exercise Diligence With Respect To Conditions, etc.

Each Party shall proceed diligently, honestly and in good faith and use all reasonable efforts with respect to all matters within its control to satisfy the conditions referred to in Sections 7.1 and 7.2.  In particular:

(a)         The Vendor and the Purchaser shall each use all of their respective reasonable efforts, and shall cooperate with each other, to make and obtain all governmental and regulatory filings, approvals and consents as may be or become necessary for or in connection with the consummation of the transactions contemplated by this Agreement, including the Purchaser and the Vendor shall cooperate to make reasonable efforts to respond to any governmental request or inquiry with respect thereto, but none of the Purchaser or the Vendor, or any of their Affiliates, shall be required to make any payment (other than for reasonable legal fees) that it is not presently contractually required to make, divest any assets, make any change in the conduct of its business, accept any limitation on the future conduct of its business, enter into any other agreement or arrangement with any Person that it is not presently contractually required to enter into, accept any significant modification in any existing agreement or arrangement, or agree to any of the foregoing, or to litigate or participate in administrative actions regarding such filings.

(b)        The Purchaser will, at the reasonable request of the Vendor, from time to time during the Interim Period, provide the Vendor and their representatives with copies of all applications, filings, notifications, submissions and other correspondence or documents (including drafts thereof) related to the satisfaction of the conditions to Closing together with such written advice and information with respect to the status of the Purchaser's efforts to obtain the satisfaction of the conditions to Closing as the Vendor may reasonably request.

7.4        Waiver Of Conditions

The conditions in Section 7.1 are for the sole benefit of the Purchaser and the conditions in Section 7.2 are for the sole benefit of the Vendor.  The Party for the benefit of which such conditions have been included may waive any of them, in whole or in part, by written notice to the other Party.

7.5        Failure To Satisfy Conditions

If any of the conditions in Sections 7.1 or 7.2 has not been satisfied at or before the Outside Date and such condition has not been waived by the Party for the benefit of which such condition has been included, such Party may terminate this Agreement pursuant to Section 8.1 by written notice to the other Party prior to the Closing.

ARTICLE 8
TERMINATION

8.1        Grounds for Termination

This Agreement may be terminated prior to the Outside Date:

(a)         by the mutual written agreement of the Vendor and the Purchaser;

(b)        in accordance with Section 7.5 by the Party and in the circumstances contemplated thereby; or

(c)         by the Vendor or the Purchaser if the consummation of the transaction contemplated by this Agreement would violate any non-appealable final order, decree or judgment of any court or governmental body having competent jurisdiction;

(d)        by the Purchaser in the event that a material adverse change occurs in the PNG Assets or in assets, liabilities, or operations of Leland Energy after the Signing Date, as the case may be;

provided that, notwithstanding anything to the contrary express or implied herein, a Party shall not be allowed to exercise any right of termination pursuant to this Section 8.1 if the event giving rise to such right is due to a Purchase Agreement Default by such Party.

8.2        Effect of Termination

If this Agreement is terminated by a Party as permitted under Section 8.1 hereof:

(a)         except as contemplated by this Section 8.2 and Section 8.3, such termination shall be without liability of any Party to any other Party to this Agreement, or to any of their shareholders, directors, officers, employees, agents, consultants or representatives, and the Parties shall be released from all of their obligations under this Agreement;

(b)        subject to Section 8.2(c), if such termination shall result from or relate to a Purchase Agreement Default of a Party, such Party shall not be released from such Purchase Agreement Default and shall be fully liable for any and all losses, costs, damages (excluding consequential damages), expenses, charges, fines, penalties, assessments or other liabilities sustained or incurred by the other Party or Parties directly or indirectly as a result thereof;

(c)         Section 8.2(b) shall not apply to termination by the Purchaser for a Purchase Agreement Default of the Vendor that arises as a result of a misrepresentation or breach of warranty made by the Vendor under Section 5.1 that is beyond its reasonable control or a failure of the Vendor to perform or observe in any material respect any of the covenants or agreements to be performed by the Vendor which are beyond their reasonable control; and

(d)        the Purchaser shall promptly destroy or return to the Vendor all materials delivered to the Purchaser by the Vendor hereunder, together with all copies of them that may have been made by or for the Purchaser.

8.3        Entitlement to Deposit on Termination

If this Agreement is terminated pursuant to Section 8.1  and the event giving rise to the termination is not due to the Purchase Agreement Default of the Purchaser, then the Deposit provided for in Section 2.4 shall be returned to the Purchaser, together with Deposit Interest earned thereon.  However, if the Agreement is terminated pursuant to Section 10.4 prior to Closing as a result of a Purchase Agreement Default by the Purchaser, then such Deposit, together with the Deposit Interest earned thereon, shall be retained by the Vendor and applied by the Vendor as its sole remedy on account of its damages contemplated by Section 8.2 as a genuine pre-estimate of the Vendor's minimum liquidated damages and not as a penalty.

ARTICLE 9
INFORMATION, MATERIALS AND CONTINUING REPORTS

9.1        Access to Information

After the Closing Date, the Vendor may upon reasonable notice to the Purchaser and subject to contractual restrictions relative to disclosure, have access during business hours to the Title and Operating Documents, any engineering report, the Financial Statements and the financial statements, books, accounts, records, minute books, Tax Returns, tax assessments, filings, maps, documents, files, information and materials of Leland Energy delivered to the Purchaser pursuant to the terms hereof and to obtain and copy information in respect of matters arising out of or relating to any period of time through the Closing if copies of such records or if the information derived from such access would be helpful and beneficial to the Vendor:

(i)          in connection with audits;

(ii)         in connection with the Vendor's dealings with taxing and other regulatory authorities;

(iii)        to comply with Applicable Law;

(iv)       in connection with any action, suit or proceeding commenced or threatened by Leland Energy, the Purchaser, or any third Person against the Vendor, its Affiliates or its or its directors, officers, employees, agents, solicitors, engineers, accountants and consultants for which the Vendor or its Affiliates may have any liability.

9.2        Tax Returns

The Vendor shall, on a timely basis,  prepare and file all Tax Returns and forms for taxes applicable to Leland Energy for periods ending on or before the Closing Date, subject to review and approval (which approval shall not be unreasonably withheld) by the Purchaser, and the Purchaser shall provide the Vendor reasonable access to all information required to do so on a timely basis.

ARTICLE 10
LIABILITY AND INDEMNIFICATION

10.1     Defined Terms

In this Article 10:

"Additional Indemnitees" means, with respect to any Person to which an indemnity is granted pursuant to this Article 10, its Affiliates and the respective directors, officers, servants, agents, representatives, advisors and employees of that Person and its Affiliates.

"Indemnified Losses" means all losses, costs, damages, expenses, charges, fines, penalties, assessments or other liabilities whatsoever, but does not include consequential, incidental, economic or punitive losses, damages or claims.

"Notice of Claim" means a notice by the Vendor or the Purchaser, as applicable, on behalf of itself or one or more Additional Indemnities (if applicable) of a claim for Indemnified Losses pursuant to Section 10.2, or 10.3 as applicable, together with detailed particulars as to the nature and amount of the claim, the basis which it is sought and the provisions of this Agreement applicable to such claim.

10.2     Responsibility of Vendor

Subject to the limitations set forth herein, the Vendor shall:

(a)         be liable to the Purchaser and their Additional Indemnitees for all Indemnified Losses which any one or more of them may suffer, sustain, pay or incur; and

(b)        indemnify and save harmless the Purchaser and their Additional Indemnitees from and against all Indemnified Losses which may be brought against or suffered by any one or more of them or which any one or more of them may sustain, pay or incur;

as a direct result of any act, omission, circumstance or other matter arising out of, resulting from, attributable to or connected with any Purchase Agreement Default made by the Vendor.

10.3     Responsibility of Purchaser

Subject to the limitations set forth herein, the Purchaser shall:

(a)         be liable to the Vendor and their Additional Indemnitees for all Indemnified Losses which any one or more of them may suffer, sustain, pay or incur; and

(b)        indemnify and save harmless the Vendor and their Additional Indemnitees from and against all Indemnified Losses which may be brought against or suffered by any one or more of them or which any one or more of them may sustain, pay or incur;

as a direct result of any act, omission, circumstance or other matter arising out of, resulting from, attributable to or connected with any Purchase Agreement Default made by the Purchaser.

10.4     Limit on Vendor's Responsibility

The Vendor's obligations and liability under this Agreement shall be subject to the following limitations:

(a)         The Vendor shall have no liability in connection with any Indemnified Losses until the aggregate of such claims exceeds Seven Hundred and Fifty Thousand ($750,000.00) Dollars and, upon the aggregate of such claims exceeding Seven Hundred and Fifty Thousand ($750,000.00) Dollars, the Vendor shall be required to indemnify in respect of only the amount of such Indemnified Losses to the extent they aggregate in excess of One Hundred and Fifty Thousand ($150,000.00) Dollars PROVIDED THAT any Indemnified Losses arising out of the Vendor's representation and warranty in Section 5.1(nn) or amounts owing under Section 2.5(g) shall not be subject to this Section 10.4(a).

(b)        The maximum liability of the Vendor under this Agreement, including any claims for Indemnified Losses, shall be an amount equal to the Purchase Price (prior to adjustments) paid to the Vendor at Closing;

(c)         If this Agreement is terminated prior to the Closing Date by the Purchaser pursuant to Section 8.1 the Vendor shall have no liability for Indemnified Losses arising out of, resulting from, attributable to or connected with those Purchase Agreement Defaults referred to in Section 8.2(c).

(d)        The Vendor shall have no liability in connection with Indemnified Losses unless the Purchaser shall, prior to the expiry of the Survival Period, or in the case of the representation and warranty in Section 5.4, such period indicated in Section 5.4, have provided such Party with a Notice of Claim.

10.5     Responsibility Extends To Legal Costs and Settlements

Notwithstanding any provision to the contrary contained in this Article 10 references to costs in the liability and indemnification obligations prescribed by Sections 10.2 and 10.3 shall be deemed to include legal (on a solicitor-client basis) and other professional fees and disbursements on a full indemnity basis, and shall extend to settlements, satisfactions or other compromises with respect to claims by third Persons for Indemnified Losses.

10.6     Limitations

Notwithstanding anything herein to the contrary:

(a)         The indemnities provided in Sections 10.2 and 10.3 shall not apply to the extent that claims for Indemnified Losses are reimbursed to the Person to be indemnified by insurance.

(b)        If Indemnified Losses suffered, sustained, paid or incurred by Persons claiming indemnity at any time before or subsequent to the making of an indemnity payment are reduced by any tax benefit or recovery, the amount of such reduction, together with Interest thereon from the date of payment thereof, shall promptly be paid by the Person claiming indemnity to the indemnifying party.

10.7     Limitation on Rights or Remedies

(a)         This Article 10, together with the matters set forth in Sections 2.6, 3.3, Article 7 and Article 8, sets forth the sole rights and remedies of each Party and its Additional Indemnitees in connection with (i) the transactions contemplated herein, and (ii) any act, omission, circumstance or other matter arising out of, resulting from, attributable to or connected with any Purchase Agreement Default made by the other Party, and such first mentioned Party and its Additional Indemnitees shall have no further right or remedy (whether legal, equitable, fiduciary or in tort) whatsoever, against the other Party, or its Affiliates or their respective directors, officers, servants, agents, advisors or employees.

(b)        The Purchaser acknowledges that it shall not be entitled to any rights or remedies as against the Vendor, its Affiliates or its directors, officers, servants, agents and employees under Applicable Law, including common law or in equity, pertaining to any Indemnified Losses, in respect of which it is required to indemnify the Vendor pursuant to Section 10.2 or 10.3, as applicable, and that it shall not be entitled to name the Vendor or their Affiliates or their respective directors, officers, servants, agents and employees under Section 10.2 or 10.3, as applicable, as third party to any action pertaining or related to any Indemnified Losses in respect of which it is required to indemnify the Vendor pursuant to Sections 10.2 or 10.3,  commenced by any third Person against the Purchaser or Leland Energy, as the case may be.

10.8     Notice of Claim

In the event that an indemnified party (the "Indemnified Party") shall become aware of any claim, proceeding or other matter (a "Claim") in respect of which the Vendor or the Purchaser (the "Indemnifying Party") agreed to indemnify the Indemnified Party pursuant to this Agreement, the Indemnified Party shall promptly give written notice thereof to the Indemnifying Party.  Such notice shall specify whether the Claim arises as a result of a claim by a person against the Indemnified Party (a "Third Party Claim") or whether the Claim does not so arise (a "Direct Claim"), and shall also specify with reasonable particularity (to the extent that the information is available) the factual basis for the Claim and the amount of the Claim, if known.

10.9     Direct Claims

With respect to any Direct Claim, following receipt of notice from the Indemnified Party of the Claim, the Indemnifying Party shall have 60 days to make such investigation of the Claim as is considered necessary or desirable.  For the purpose of such investigation, the Indemnified Party shall make available to the Indemnifying Party the information relied upon by the Indemnified Party to substantiate the Claim, together with all such other information as the Indemnifying Party may reasonably request.  If both parties agree at or prior to the expiration of such 60 day period (or any mutually agreed upon extension thereof) to the validity and amount of such Claim, the Indemnifying Party shall immediately pay to the Indemnified Party the full agreed upon amount of the Claim, failing which the matter shall be referred to binding arbitration in such manner as the parties may agree or shall be determined by a court of competent jurisdiction.  To the extent that there are funds in the possession of the Escrow Agent, the Purchaser shall be entitled to recover amounts owing to it by the Vendor from the Escrow Amount or otherwise.

10.10   Third Party Claims

With respect to any Third Party Claim, the Indemnifying Party shall have the right, at its expense, to participate in or assume control of the negotiation, settlement or defence of the Claim and, in such event, the Indemnifying Party shall reimburse the Indemnified Party for all the Indemnified Party's out-of-pocket expenses as a result of such participation or assumption.  If the Indemnifying Party elects to assume such control, the Indemnified Party shall have the right to participate in the negotiation, settlement or defence of such Third Party Claim and to retain counsel to act on its behalf, provided that the fees and disbursements of such counsel shall be paid by the Indemnified Party unless the Indemnifying Party consents to the retention of such counsel or unless the named parties to any action or proceedings include both the Indemnifying Party and the Indemnified Party and a representation of both the Indemnifying Party and the Indemnified Party by the same counsel would be inappropriate due to the actual or potential differing interests between them (such as the availability of different defences).  If the Indemnifying Party, having elected to assume such control, thereafter fails to defend the Third Party Claim within a reasonable time, the Indemnified Party shall be bound by the results obtained by the Indemnified Party with respect to such Third Party Claim.  If any Third Party Claim is of a nature such that the Indemnified Party is required by applicable law to make a payment to any person (a "Third Party") with respect to the Third Party Claim before the completion of settlement negotiations or related legal proceedings, the Indemnified Party may make such payment and the Indemnifying Party shall, forthwith after demand by the Indemnified Party, reimburse the Indemnified Party for such payment.  If the amount of any liability of the Indemnified Party under the Third Party Claim in respect of which such payment was made, as finally determined, is less than the amount that was paid by the Indemnifying Party to the Indemnified Party, the Indemnified Party shall forthwith after receipt of the difference from the Third Party, pay the amount of such difference to the Indemnifying Party.

10.11   Settlement of Third Party Claims

If the Indemnifying Party fails to assume control of the defence of any Third Party Claim, the Indemnified Party shall have the exclusive right to contest, settle or pay the amount claimed.  Whether or not the Indemnifying Party assumes control of the negotiation, settlement or defence of any Third Party Claim, the Indemnifying Party shall not settle any Third Party Claim without the written consent of the Indemnified Party, which consent shall not be unreasonably withheld or delayed.

10.12   No Merger of Legal Responsibilities

The liabilities and indemnities created in this Article 10 shall be deemed to apply to, and shall not merge in, all assignments, transfer and other documents conveying any of the Leland Energy Shares to the Purchaser, notwithstanding the terms of such assignments, transfers, conveyances, novations and other documents, Applicable Law or any rule of law or equity to the contrary, and all such rules are hereby waived.

ARTICLE 11
ARBITRATION

11.1     Reference to Arbitration

(a)         Insofar as the Parties are unable to agree on any matter which expressly may be referred to arbitration hereunder, either Party may serve the other Party written notice that it wishes such matter referred to arbitration.

(b)        The Parties shall meet within 7 days of the receipt of a notice issued pursuant to Section 11.1(a) to attempt to agree on a single arbitrator qualified by experience, education and training, to determine such matter.  If the Parties are unable to agree on the selection of the arbitrator, the Party which issued such notice shall forthwith make application to a judge of the Court of Queen's Bench of the Province of Alberta pursuant to the Arbitration Act (Alberta) for the appointment of a single arbitrator, and failing such action on the part of the Party which issued such notice, the other Party may make such application.

11.2     Reference to Arbitration

(a)         The arbitrator selected pursuant to Section 11.1 shall proceed as soon as is practicable to hear and determine the matter in dispute, and shall be directed to provide a written decision respecting such matter within 45 days of appointment.  The Parties shall provide such assistance and information as may be reasonably necessary to enable the arbitrator to determine such matter.

(b)        Except to the extent modified in this Article, the arbitrator shall conduct any arbitration hereunder pursuant to the provisions of the Arbitration Act (Alberta).

(c)         The liability between the Parties for the payment of the compensation and expenses of the arbitrator shall be determined by the arbitrator.

ARTICLE 12
CONFIDENTIALITY OF THE PURCHASER AND PRESS RELEASE

12.1     Return of Documents

If Closing does not occur and this Agreement is terminated, then all documents, working papers and other written material obtained from the Vendor or Leland Energy in connection with this Agreement shall be returned to the Vendor or Leland Energy as the case may be, forthwith.  No copies of such information are to be retained by the Purchaser.

12.2     Press Release

The parties agree that, notwithstanding the Confidentiality Agreements, the Purchaser may issue press releases and make such filings as are necessary or desirable under the securities laws or the applicable stock exchange regulations with respect to the Closing, and the parties hereby waive any rights they may have under the Confidentiality Agreements to the extent necessary to permit such press releases and securities law filings.

ARTICLE 13
MISCELLANEOUS PROVISIONS

13.1     Waiver Must Be In Writing

No waiver by any Party of any breach (whether actual or anticipated) of any of the terms, conditions, representations or warranties contained herein shall take effect or be binding upon that Party unless the waiver is expressed in writing under the authority of that Party. Any waiver so given shall extend only to the particular breach so waived and shall not limit or affect any rights with respect to any other or future breach.

13.2     No Amendment Except In Writing

This Agreement may be amended only by written instrument executed by the Vendor and the Purchaser.

13.3     Assignments Before Closing

Prior to Closing, no Party may assign its interest in or under this Agreement without the prior written consent of the other Parties, provided however that the Purchaser may assign its interest in or under this Agreement to an Affiliate without the prior written consent of the Vendor providing however that the Purchaser shall continue to be liable to the Vendor in the event of a Purchase Agreement Default by such assignee.

13.4     Service Of Notice

Notwithstanding anything to the contrary contained herein, all notices required or permitted hereunder shall be in writing.  Any notice to be given hereunder shall be deemed to be served properly if served in any of the following modes:

(a)         personally, by delivering the notice to the Party on which it is to be served at that Party's address for service.  Personally served notices shall be deemed to be received by the addressee when actually delivered as aforesaid, provided that such delivery shall be during normal business hours on any Business Day.  If a notice is not delivered on a Business Day or is delivered after the addressee's normal business hours, such notice shall be deemed to have been received by such Party at the commencement of the addressee's first Business Day next following the time of the delivery; or

(b)        by facsimile (or by any other like method by which a written message may be sent) directed to the Party on which it is to be served at that Party's address for service. A notice so served shall be deemed to be received by the addressee when actually received by it, if received within normal business hours on any Business Day or at the commencement of the next ensuing Business Day following transmission if such notice is not received during business hours.

13.5     Addresses For Notices

The address for service of notices hereunder of each of the Parties shall be as follows:

to the Vendor:

Kaiser Energy Ltd.
Suite 1000, 700 – 4^th Avenue SW
Calgary, Alberta
T2P 3J4
Fax: (403)265-3161
Attention:  Doug Gundy

to the Purchaser:

MarkWest Acquisitions Corp.
c/o MarkWest Resources Canada
155 Inverness Drive West
Suite 200
Englewood, Colorado USA
80112-5000
Fax:  (303) 290-8700
Attention:  Chairman of the Board

A Party may change its address for service by notice to the other Party, and such changed address for service thereafter shall be effective for all purposes of this Agreement.

13.6     Tax Election

The parties agree that the Purchaser will not and the Purchaser hereby covenants not to make an election under section 338(g) of the Internal Revenue Code of 1986, as amended with respect to its purchase of the Leland Shares pursuant to this Agreement.

13.7     Costs and Expenses

Except as specifically provided herein, all legal and other costs and expenses in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party which incurred the same.  For greater certainty the Vendor shall be responsible for all costs, fees and disbursements chargeable by the Vendor's Counsel, Ernest & Young and Waterous Securities Inc. relating directly to the transactions contemplated by or consummated as a result of this Agreement and (for clarity) the Vendor shall have no obligation to pay any costs of engineering reports prepared before the Closing Date.

13.8     Further Assurances

At the Closing Date and thereafter as may be necessary, the Parties shall execute, acknowledge and deliver such instruments and take such other actions as may be reasonably necessary to fulfil their respective obligations under this Agreement.

13.9     Governing Law; Attornment; Etc.

(a)         This Agreement and all such documents executed in connection with this agreement and the transactions contemplated hereby shall be governed by, and construed and enforced in accordance with the applicable laws, other than conflict of laws rules, prevailing in the Province of Alberta.

(b)        The Parties irrevocably

(i)          submit and attorn to the non–exclusive jurisdiction of the Courts of the Province of Alberta for all matters arising out of or relating to this Agreement, or any of the transactions contemplated hereby except that the Parties irrevocably submit and attorn to the non-exclusive jurisdiction of the Courts of the Province of Alberta for such matters arising out of or relating to documentation specifically made to be governed by the terms of the applicable laws of the Province of Alberta pursuant to Section 13.9(a);

(ii)         waive all right to object to jurisdiction of such Courts in any legal action or proceeding relative to this Agreement or the transactions contemplated hereby or execution of any judgment, order or decree issued in or as a result of any such action, suit or proceeding which they may now or hereafter have by reason of domicile or otherwise;

(iii)        waive any objection to the laying of venue in such Courts of any of the aforesaid actions, suits or proceedings arising out of or in connection with this Agreement or the transactions contemplated hereby;

(iv)       waive and agree not to plead or claim that any action, suit or proceeding in such Courts has been brought in an inconvenient forum; and

(v)        waive any right they may have to, or to apply for, trial by jury in connection with any matter, action, proceeding, claim or counterclaim arising out of or relating to this Agreement or any of the transactions contemplated hereby.

13.10   Invalidity of Provisions

If any of the provisions of this Agreement are determined to be invalid, illegal or unenforceable in any respect, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

13.11   Time

Time shall be of the essence in this Agreement.

13.12   Supersedes Earlier Agreements

This Agreement along with the Confidentiality Agreement constitutes the entire agreement between the Parties relating to the subject–matter hereof; and there are no collateral or other statements, understandings, covenants, agreements, representations or warranties, written or oral, relating to the subject–matter hereof.  This Agreement supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, between the Parties or their predecessors relating to the subject–matter of this Agreement provided that the Confidentiality Agreement shall remain in full force and effect in accordance with its terms.

13.13   Enurement

This Agreement shall be binding upon and enure to the benefit of the Parties and their respective successors and permitted assigns.

13.14   Counterpart Execution

This Agreement and any document or instrument to be executed and delivered by the Parties hereunder or in connection herewith may be executed and delivered in separate counterparts and delivered by one Party to the other by facsimile, each of which when so executed and delivered shall be deemed an original and all such executed counterparts shall together constitute one and the same agreement.  If this Agreement or any such document or instrument is delivered by facsimile, the Party so delivering this Agreement or such document or instrument shall within a reasonable time after such delivery deliver an original executed copy to the other.

IN WITNESS WHEREOF the Parties have duly executed this Agreement.

KAISER ENERGY LTD.

Per:

Per:

MARKWEST ACQUISITIONS CORP.

Per:

Per:

EX-2.2

EXHIBIT 2.2

MARKWEST ACQUISITIONS CORP.

BRIAN E. HIEBERT, GUY C. GRIERSON, IAN R. DE BIE, GORDON A. MAYBEE, ERIN HIEBERT, RAYLENE GRIERSON, KATHLEEN DE BIE, PATRICIA MAYBEE

WATFORD ENERGY LIMITED

SHARE PURCHASE AGREEMENT

August 10, 2001

ARTICLE 1 DEFINITIONS AND SCHEDULES
1.1	Definitions
1.2	Schedules
1.3	References and Headings
1.4	Singular/Plural; Derivatives
1.5	Statutory References
1.6	Conflicts
1.7	Accounting References
1.8	Vendor's Knowledge
1.9	Purchaser's Knowledge
ARTICLE 2 PURCHASE AND SALE OF AMALCO SHARES
2.1	Purchase and Sale of Amalco Shares
2.2	Purchase Price and Allocation of Purchase Price
2.3	Incremental Adjustment to Purchase Price re Watford Portion
2.4	Incremental Adjustment to Purchase Price re Leland Portion
2.5	Deposit
2.6	Adjustments to Purchase Price
2.7	Interest Accrues on Amounts Owing
2.8	Manner of Payment
ARTICLE 3 CLOSING
3.1	Place and Closing Time
3.2	Deliveries at Closing
3.3	Escrow of Funds
ARTICLE 4 INTERIM PERIOD
4.1	Access
4.2	Maintenance of Business and PNG Assets
4.3	Certain Changes Restricted
4.4	Dealings or Operations re PNG Assets
4.5	Proposals for Dealings or Operations re PNG Assets
4.6	Existing Authorizations for Expenditure and Watford Drilling Program
4.7	Certain Bonuses and Dividends
4.8	Prohibited Negotiations
4.9	Pre-Closing Transaction re Amalgamation
4.10	Insurance
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF PARTIES
5.1	Vendors' Representations and Warranties
5.2	Purchaser's Representations and Warranties
5.3	Survival of Representations and Warranties
5.4	Survival of Representations and Warranties re Tax
5.5	No Additional Representations Or Warranties By Vendors
5.6	No Merger
ARTICLE 6 ACCESS TO PNG ASSETS
6.1	Vendors To Provide Access to PNG Assets
ARTICLE 7 CONDITIONS TO CLOSING
7.1	Conditions to the Obligations of the Purchaser
7.2	Conditions to the Obligations of Vendors to Close
7.3	Parties To Exercise Diligence With Respect To Conditions, etc.
7.4	Waiver Of Conditions
7.5	Failure To Satisfy Conditions
ARTICLE 8 TERMINATION
8.1	Grounds for Termination
8.2	Effect of Termination
8.3	Entitlement to Deposit on Termination
ARTICLE 9 INFORMATION, MATERIALS AND CONTINUING REPORTS
9.1	Access to Information
9.2	Tax Returns
ARTICLE 10 LIABILITY AND INDEMNIFICATION
10.1	Defined Terms
10.2	Responsibility of Vendors
10.3	Responsibility of Purchaser
10.4	Limit on Vendors' Responsibility
10.5	Responsibility Extends To Legal Costs and Settlements
10.6	Limitations
10.7	Limitation on Rights or Remedies
10.8	Notice of Claim
10.9	Direct Claims
10.10	Third Party Claims
10.11	Settlement of Third Party Claims
10.12	No Merger of Legal Responsibilities
ARTICLE 11 ARBITRATION
11.1	Reference to Arbitration
11.2	Reference to Arbitration
ARTICLE 12 CONFIDENTIALITY OF THE PURCHASER AND PRESS RELEASE
12.1	Return of Documents
12.2	Press Release
ARTICLE 13 MISCELLANEOUS PROVISIONS
13.1	Waiver Must Be In Writing
13.2	No Amendment Except In Writing
13.3	Assignments Before Closing
13.4	Service Of Notice
13.5	Addresses For Notices
13.6	Tax Election
13.7	Costs and Expenses
13.8	Further Assurances
13.9	Governing Law; Attornment; Etc.
13.10	Invalidity of Provisions
13.11	Time
13.12	Supersedes Earlier Agreements
13.13	Enurement
13.14	Counterpart Execution

SHARE PURCHASE AGREEMENT

             THIS SHARE PURCHASE AGREEMENT is made as of this 10th day of August,2001.

BETWEEN:

BRIAN E. HIEBERT of Calgary, Alberta, GUY C. GRIERSON of Calgary, Alberta, IAN R. DE BIE of Calgary, Alberta, GORDON A. MAYBEE of Calgary, Alberta, ERIN HIEBERT of Calgary, Alberta, RAYLENE GRIERSON of Calgary, Alberta, KATHLEEN DE BIE of Calgary, Alberta and PATRICIA MAYBEE of Calgary, Alberta (individually a "Vendor" and collectively, the "Vendors")

– and –

MARKWEST ACQUISITIONS CORP., an Alberta corporation (the "Purchaser")

WHEREAS:

A.         the Vendors currently beneficially own, directly or indirectly, all of the issued and outstanding shares of the Watford Entities and Watford Energy;

B.          it is intended that the Watford Entities and Watford Energy, will amalgamate (the "Amalgamation") and continue as a new corporation ("Amalco"), and on such Amalgamation, the property and assets of each of the Watford Entities and Watford Energy shall continue to be the property and assets of Amalco;

C.          on the Amalgamation becoming effective, the Vendors will be all of the registered and beneficial owners of all of the Amalco Shares; and

D.         the Vendors desire to sell and the Purchaser desires to purchase, all of the Amalco Shares following the Amalgamation, upon and subject to the terms and conditions set forth in this Agreement.

             NOW THEREFORE, for good and valuable consideration (the sufficiency and receipt of which is acknowledged by each Party), the Parties agree as follows:

ARTICLE 1
DEFINITIONS AND SCHEDULES

1.1        Definitions

In this Agreement, including the recitals and the Schedules, unless otherwise stated or the context otherwise requires:

"Abandonment and Reclamation Obligations" means all remediation and reclamation obligations of the Watford Entities, Watford Energy and Amalco, including:

(a)         the proper abandonment and reclamation of any Wells; and

(b)        the closure, decommissioning and dismantling of Tangibles, and the restoration of the surface in respect thereto, all in accordance with good oil and gas field practices, and in compliance with Applicable Law.

"Accounting Firm" means KPMG, Chartered Accountants, or such other firm of chartered accountants as may be selected by the Parties.

"Additional Indemnitees" has the meaning attributed to it in Section 10.1.

"Adjusted Working Capital" means the book value of the current assets, as recorded on the Effective Date Balance Sheets, less the aggregate, without duplication, of (i) the book value of the current liabilities, as recorded on the Effective Date Balance Sheets, plus (ii) the book value of the debt (other than amounts in respect of the line item titled "Future Income Tax" in the Effective Date Balance Sheets) as recorded on the Effective Date Balance Sheets, plus (iii) any liability in respect of any Futures Transaction; PROVIDED HOWEVER that: (A) all revenues, expenses and costs of the Watford Holdcos prior to the Watford Effective Date, (other than revenues, expenses and costs of the Leland Holdcos), will be accrued in accordance with GAAP as if received or paid, as the case may be, prior to the Watford Effective Date; (B) all revenues, expenses and other costs of the Leland Holdcos prior to the Leland Effective Date will be accrued in accordance with GAAP as if received or paid, as the case may be, prior to the Leland Effective Date; and (C) any expenses or costs incurred in connection with the Watford Drilling Program shall have no effect upon and shall not be included in calculation of Adjusted Working Capital.

"Affiliate" means, in respect of a Person, any other Person or group of Persons acting in concert, directly or indirectly, that controls, is controlled by or under common control with the first mentioned Person, and for the purposes of this definition "control" means the possession, directly or indirectly, by such Person or group of Persons acting in concert, of the power to direct or cause the direction of the management and policies of the first mentioned Person, whether through the ownership of voting securities or otherwise.

"Agreement" means this document, together with the Schedules attached hereto and made a part hereof, all as amended, supplemented or modified from time to time in accordance with the provisions hereof.

"Amalco" means the continuing corporation formed as a result of the Amalgamation.

"Amalco Shares" means all of the issued and outstanding Shares of Amalco.

"Amalgamation" means the amalgamation of the Watford Entities and Watford Energy pursuant to the Amalgamation Agreement.

"Amalgamation Agreement" means collectively the amalgamation agreement attached to this Agreement as Schedule 1.2(g)

"Applicable Law" means, in relation to any Person, transaction or event, all applicable provisions of laws, statutes, rules, regulations, official directives and orders of all federal, provincial, municipal and local governmental bodies (whether administrative, legislative, executive or otherwise) and judgments, orders and decrees of all courts, arbitrators, commissions or bodies exercising similar functions in actions or proceedings in which the Person in question is a party, by which it is bound or having application to the transaction or event in question.

"Arbitrator" has the meaning set forth in Section 2.6(e).

"Burdens" means, collectively, Royalty Interests and Security Interests.

"Business Day" means a day on which banks are generally open for the transaction of commercial business in both Calgary, Alberta and Denver, Colorado but does not in any event include a Saturday or a Sunday or a bank holiday under Applicable Law.

"Closing" means the completion of the purchase and sale of the Amalco Shares as contemplated by this Agreement.

"Closing Date" means the later of (i) August 10, 2001, (ii) the Business Day after the date on which all the conditions to Closing are satisfied or waived, and (iii) the Outside Date.

"Closing Funds" has the meaning ascribed to it in Section 2.5.

"Closing Time" means the time that the documents or actions effecting the transactions comprising the Closing are delivered or taken and released from the terms of any escrow governing the Closing.

"Confidentiality Agreements" means the Confidentiality Agreement dated May 15, 2001 between MarkWest Hydrocarbons, Inc. and Leland Energy Inc. and the Confidentiality Agreement dated June 11, 2001 between MarkWest Hydrocarbons, Inc. and Watford Energy Ltd., copies of which are attached hereto as Schedule 1.2(m).

"Deposit" means an amount equal to 5% of the Purchase Price.

"Deposit Interest" has the meaning ascribed to it in Section 2.5.

"Dollar" or "$" means, unless otherwise provided herein, a dollar in the lawful money of Canada.

"Effective Date Balance Sheets" means the Leland Effective Date Balance Sheet and the Watford Effective Date Balance Sheet.

"Environmental Damage" means any one or more of:

(i)          ground water, surface water or aquifer contamination;

(ii)         soil contamination;

(iii)        substance or energy emissions which are either toxic or hazardous;

(iv)       death or injury to plant, animals or human beings due in whole or in part to any of the foregoing items (i) through (iii),

but only to the extent the foregoing is or has been in breach of or exceeds limitations imposed by Environmental Law and shall not include Abandonment and Reclamation Obligations.

"Environmental Law" means Applicable Law respecting the protection of, or the control of contamination or pollution of soil, air or water (including ground water) and human health and safety.

"Escrow Agent" has the meaning ascribed to it in Section 3.3.

"Escrow Agreement" means an agreement substantially in the same form as attached hereto as Schedule 1.2(l).

"Escrow Amount" has the meaning ascribed to such term in Section 3.3.

"Financial Statements" means the Leland Financial Statements and the Watford Financial Statements.

"Flow Through Share Agreements" means the Flow Through Share Agreements dated July 1, 2000 as further described in Schedule 1.2(h).

"Flow Through Share Release" means a release executed by each of the Vendors in substantially the same form as attached hereto as Schedule 1.2(o).

"Futures Transaction" means any derivatives transaction (including an agreement with respect thereto) which is commonly referred to as a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination of these transactions.

"GAAP" or "generally accepted accounting principles" means accounting principles generally accepted at the relevant time in Canada, and where the "CICA Handbook", as amended from time to time, or any successor publication published by the Canadian Institute of Chartered Accountants, contains (i) a single recommendation as to treatment of a matter, such recommendation shall constitute GAAP and generally accepted accounting principles herein, or (ii) more than one recommendation as to treatment of a matter, any of such recommendations shall constitute GAAP and generally accepted accounting principles herein.

"Gulf Transactions" means the transactions consummated in accordance with the agreement titled "Purchase of Partnership Interest of Leland Energy Partnership by Gulf Canada Resources Limited" dated May 15, 2000 among Kaiser Energy Ltd., Hiebert Resources Ltd., Grierson Resources Ltd., Wild River Resources Ltd. and Maybee Resources Ltd. and Gulf Canada Resources Limited and 758350 Alberta Inc. and the agreement titled "Purchase of Shares of Leland Energy Resources Ltd. by Gulf Canada Resources Limited" dated June 12, 2000 among Kaiser Energy Ltd., Hiebert Resources Ltd., Grierson Resources Ltd., Wild River Resources Ltd. and Maybee Resources Ltd. and Gulf Canada Resources Limited.

"Hazardous Materials" means (i) pollutants, contaminants and hazardous or toxic chemicals, materials, substances or wastes, and (ii) any chemical, material, substance or waste that is regulated pursuant to any Environmental Law.

"include" and "including" mean "include, without limitation" and "including, without limitation", respectively.

"Indemnified Losses" has the meaning attributed to it in Section 10.1.

"Interim Period" means the period between the Signing Date and the Closing Date.

"Interest Rate" means an annual rate of interest of five (5%) percent.

"Land Schedule" means Schedule 1.2(a), as amended by the Parties at anytime prior to Closing.

"Lands" means the lands set forth and described in the Land Schedule including the Petroleum Substances within, upon or under the lands (subject to the restrictions and exclusions set forth in the Leases as to the Petroleum Substances and geological formations), but does not include Surface Rights.

"Leases" means the leases, licences, permits and other documents of title, by virtue of which the holder thereof is entitled to drill for, win, take, store, own or remove the Petroleum Substances or dispose of saltwater brine within, upon or under the Lands or by virtue of which the holder thereof is deemed to be entitled to a share of Petroleum Substances removed from the Lands or any lands with which the Lands are pooled or unitized and includes, if applicable, all renewals and extensions of such documents and all documents issued in substitution therefor.

"Leland Effective Date" means 11:59 a.m. on March 31, 2001.

"Leland Effective Date Balance Sheet" means the consolidated balance sheet of Brian Hiebert Energy Ltd., Guy Grierson Energy Ltd., Ian de Bie Energy Ltd., Gord Maybee Energy Ltd., E. Hiebert Energy Ltd., R. Grierson Energy Ltd., K. de Bie Energy Ltd. and P. Maybee Energy Ltd. dated March 31, 2001, prepared in accordance with GAAP, attached as Schedule 1.2(c)(i).

"Leland Financial Statements" means collectively, (i) the consolidated balance sheet of Brian Hiebert Energy Ltd., Guy Grierson Energy Ltd., Ian de Bie Energy Ltd., Gord Maybee Energy Ltd., E. Hiebert Energy Ltd., R. Grierson Energy Ltd., K. de Bie Energy Ltd. and P. Maybee Energy Ltd. as at March 31, 2001, and related income statements and statements of changes in financial position for the period ending March 31, 2001, and (ii) the Leland Effective Date Balance Sheet and related consolidated income statements and statements of cashflow of Brian Hiebert Energy Ltd., Guy Grierson Energy Ltd., Ian de Bie Energy Ltd., Gord Maybee Energy Ltd., E. Hiebert Energy Ltd., R. Grierson Energy Ltd., K. de Bie Energy Ltd. and P. Maybee Energy Ltd. for the 8 months then ended, a copy of which is attached as Schedule 1.2(d)(i).

"Leland Holdcos" means Brian Hiebert Energy Ltd., Guy Grierson Energy Ltd., Ian de Bie Energy Ltd., Gord Maybee Energy Ltd., E. Hiebert Energy Ltd., R. Grierson Energy Ltd., K. de Bie Energy Ltd. and P. Maybee Energy Ltd..

"Miscellaneous Interests" means all of the right, title, interest and estate of the Watford Entities, Watford Energy and Amalco in and to all property, rights and assets, whether contingent or absolute, legal or beneficial, present or future, vested or not, and not being Petroleum and Natural Gas Rights or Tangibles, which pertain to such Petroleum and Natural Gas Rights or Tangibles, excluding (for clarification) the Vendor Hedge Arrangements but including the following property, rights and assets:

(i)          contracts, agreements and documents (including Title and Operating Documents) relating to any of such Petroleum and Natural Gas Rights or Tangibles or any rights in relation thereto;

(ii)         Surface Rights which are used or useful in connection with any of such Petroleum and Natural Gas Rights or Tangibles;

(iii)        permits, licences, authorizations and deposits relating to any of such Petroleum and Natural Gas Rights or Tangibles, or the use thereof;

(iv)       all well bores located on the Lands or lands pooled or unitized therewith which may be used to produce Petroleum Substances from the Lands or lands pooled or unitized therewith or otherwise serve such lands;

(v)        books, maps, records, documents, seismic, geological, data processing, well, plant and other reports, files, data, information, tapes, disks, computer programs, papers or other records, which relate to or are necessary or useful in connection with any of such Petroleum and Natural Gas Rights or Tangibles or any of the property or assets referred to in (i) to (iv) of this definition;

(vi)       all extensions, renewals, replacements or amendments of the foregoing items described in items (i) to (v) of this definition.

"Notice of Claim" has the meaning attributed to it in Section 10.1.

"Objection Date" has the meaning ascribed to it in Section 2.6(d).

"Outside Date" means 5:00 p.m. on the 31^st day of August, 2001, or such later date as the Parties may agree in writing or may be expressly provided for herein.

"Parties" means the Vendors and the Purchaser and "Party" means a Vendor, the Vendors or the Purchaser, as applicable.

"Permitted Defects" means:

(i)          Permitted Encumbrances;

(ii)         Abandonment and Reclamation Obligations which under Applicable Law, as of the Closing Date, are not yet required to be undertaken; and

(iii)        any defects which are deemed to be Permitted Defects under Section 4.5(e).

"Permitted Encumbrances" means:

(i)          easements, rights of way, servitudes or other similar Surface Rights, including, without limitation, rights of way and servitudes for highways, railways, sewers, drains, gas and oil pipelines, gas and water mains, electric light, power, telephone or cable television conduits, poles, wires or cables;

(ii)         the right reserved to or vested in any government, municipality or other public authority by the term of any Title and Operating Documents or by Applicable Law to terminate any Title and Operating Documents or to require annual or other periodic payments as a condition of the continuance thereof;

(iii)        rights of general application reserved to or vested in any governmental authority to levy taxes or other levies on Petroleum Substances or the income or revenue therefrom and governmental requirements pertaining to production rates from wells on the Lands or operations being conducted on the Lands or otherwise affecting the value of any property;

(iv)       any rights reserved to or vested in any municipality or governmental, statutory or public authority to control or regulate any of the PNG Assets in any manner;

(v)        the terms and conditions of the Title and Operating Documents;

(vi)       undetermined or inchoate liens incurred or created in the ordinary course of all business as security in favour of any Person for the Watford Entities', Watford Energy's and Amalco's proportionate share of the costs and expenses applicable to the development or operation of any of the PNG Assets which are not due or delinquent or are being contested in good faith;

(vii)      the reservations, limitations, provisos and conditions in any grants or transfers from the Crown of any of the Lands or interests therein, and statutory exceptions to title;

(viii)     provisions for penalties and forfeitures under agreements as a consequence of non-participation in operations contained in the Title and Operating Documents or identified in Schedule 1.2(k);

(ix)        liens granted in the ordinary course of business to a public utility, municipality or governmental authority with respect to operations pertaining to any of the PNG Assets;

(x)         any preferential rights of purchase or any similar restriction applicable to any of the PNG Assets contained in the Title and Operating Documents or identified in Schedule 1.2(k)

(xi)        agreements and plans relating to pooling or unitization contained in the Title and Operating Documents or identified in Schedule 1.2(k);

(xii)       builder's, mechanic's, material men's and similar liens in respect of services rendered or goods supplied for which payment is not at the time due;

(xiii)      the Burdens, reduction or conversion or alteration of interests and adverse claims, in each case, set forth in the Land Schedule and all ad valorem, property, production, severance and similar taxes and assessments based on or measured by the ownership of Petroleum and Natural Gas Rights or the production of Petroleum Substances in respect of such Petroleum and Natural Gas Rights, whether or not set forth on the Land Schedule; and

(xiv)      Burdens that have not been created by, through or under Watford Energy and of which the Vendors do not have any knowledge on the Signing Date;

(xv)       other Security Interests as set forth in Schedule 1.2(k).

"Person" includes an individual, a partnership, a corporation, a trust, a joint venture, an unincorporated organization, a union, a government or any department or agency thereof and the heirs, executors, administrators or other legal representatives of an individual.

"Petroleum and Natural Gas Rights" means all of the right, title, estate and interest, whether absolute or contingent, legal or beneficial, present or future, vested or not, and whether or not an "interest in land", held by the Watford Entities, Watford Energy and Amalco in or to the Lands and the Leases together with any of the following which relate thereto, by whatever name the same are known:

(i)          rights to explore for, drill for, extract, win, produce, take, save or market Petroleum Substances;

(ii)         rights to a share of the production of Petroleum Substances;

(iii)        rights to a share of the proceeds of, or to receive payment calculated by reference to, the quantity or value of the production of Petroleum Substances, other than the rights under agreements for the sale of Petroleum Substances;

(iv)       the interests set forth in the Land Schedule hereto in and to and in respect of the Leases and the Lands subject to the Permitted Encumbrances;

(v)        rights to acquire any of the rights described in subparagraphs (i) to (iv) of this definition; and

(vi)       interests in any rights described in subparagraphs (i) to (v) of this definition,

including all interests and rights known as working interests, royalty interests, overriding royalty interests, gross overriding royalty interests, production payments, profits interests, net profits interests, revenue interests, net revenue interests, economic interests and other interest, fractional or undivided interests in any of the foregoing, and all freehold, leasehold or other interests in any Lands.

"Petroleum Substances" means petroleum, crude bitumen, natural gas, natural gas liquids, related hydrocarbons and any and all other substances, whether liquid, solid or gaseous (other than coal but including coalbed methane), whether hydrocarbon or not, produced or producible in association with any of the foregoing, including hydrogen sulphide, sulphur, water, carbon dioxide, nitrogen and oxygen.

"Place of Closing" means the offices of Blake, Cassels & Graydon LLP located at 3500, 855 - 2nd Street S.W., Calgary, Alberta, or such other place as may be agreed upon in writing by the Parties.

"PNG Assets" the Petroleum and Natural Gas Rights, the Tangibles and the Miscellaneous Interests.

"Proposal" has the meaning attributed to it in Section 4.5.

"Purchase Agreement Default" means any misrepresentation or breach of warranty made by a Party, or the failure of a Party to perform or observe in any respect any of the covenants or agreements to be performed by such Party under this Agreement or any agreement or other certificate or instrument delivered in connection herewith, and includes the obligations set forth in Section 7.3.

"Purchase Price" means the aggregate amount payable by the Purchaser to the Vendors as consideration for the Amalco Shares pursuant to Section2.2 subject to adjustment in accordance with the terms and conditions of this Agreement.

"Purchaser's Counsel" means Fraser Milner Casgrain LLP, Calgary.

"Royalty Interests" means all carried profits, net profits, net revenue, royalty interests (including the obligation attributable thereto to pay all ad valorem, property, production, severance and similar taxes and assessments based on or measured by the ownership of Petroleum and Natural Gas Rights or the production of Petroleum Substances in respect of such Petroleum and Natural Gas Rights) and similar Petroleum and Natural Gas Rights reserved or payable (by way of a share in production of Petroleum Substances or by way of money) to any Person or entity.

"Security Interest" means any mortgage, charge, pledge, lien, hypothec, assignment by way of or in effect as security, or security interest whatsoever, whether arising by agreement or otherwise, but does not include a right of set–off.

"Share Rights" means any instruments or contractual rights capable of being converted into, exchanged for or exercised for Shares of any class of a Person or giving the holder the right on the occurrence of any events, including on the payment of money, whether such events have occurred or not, to require delivery by a Person of Shares of any class of a Person and includes options, warrants, conversion or exchange privileges and similar rights.

"Shareholder Debt" means any indebtedness owed by any of the Watford Entities, Watford Energy or Amalco to any of the Vendors, or any Affiliate of the Vendors excluding any debt owing by any Watford Entity to any other Watford Entity, Amalco or Watford Energy but does not include bonuses as set forth in the Effective Date Balance Sheets.

"Shares" means any shares of any class of a corporation or body corporate.

"Signing Date" means the date of this Agreement.

"Subsidiary" when used in relation to any Person, means any Affiliate controlled, directly or indirectly, by that Person.

"Surface Rights" means rights (whether fee simple or pursuant to orders, licences, leases, easements, rights–of–way or otherwise) to enter upon, use and occupy the surface of any Lands, any lands with which the same have been pooled or unitized or any lands upon which the Tangibles are located.

"Survival Period" means the period ending 6 months after Closing.

"Take or Pay Delivery Obligations" means the obligation of the Watford Entities, Watford Energy or Amalco arising under or pursuant to any contract whereby Petroleum Substances attributable to the Petroleum and Natural Gas Rights or any of them may be sold for or in respect of payments or credits previously received by the Watford Entities, Watford Energy or Amalco, its predecessors or others in respect of Petroleum Substances, the delivery of which had not been taken by the buyer thereof at the time of the payment or crediting, whether or not:

(i)          the Watford Entities, Watford Energy or Amalco is a party to such contract;

(ii)         the buyer of such Petroleum Substances recognizes the Watford Entities, Watford Energy or Amalco, as a seller or has recourse to the Watford Entities, Watford Energy or Amalco; or

(iii)        the payment, credit or assumption was made to or by the Watford Entities, Watford Energy or Amalco, or was remitted by the Watford Entities, Watford Energy or Amalco, to any other Person.

"Take or Pay Payments" means, as at a particular time, the amounts received or receivable by and for the account of the Watford Entities, Watford Energy or Amalco, prior to such time as a result of which the Watford Entities, Watford Energy or Amalco, has Take or Pay Delivery Obligations which, as at such time, have not been satisfied and have not expired.

"Tangibles" means all right, title, estate and interest, whether absolute or contingent, legal or beneficial, present or future, vested or not, held by the Watford Entities, Watford Energy and Amalco in and to any tangible property, apparatus, plant, equipment, machinery and facilities, fixed or non–fixed, real or personal, used or capable of use in exploiting any Petroleum Substances (whether the Petroleum and Natural Gas Rights or which such Petroleum Substances are attributable to or are owned by the Watford Entities, Watford Energy, Amalco or by others or all of them), including:

(i)          systems, plants and facilities used or useful in producing, gathering, compressing, dehydrating, scrubbing, processing, treating, separating, extracting, collecting, refrigerating, refining, measuring, storing, transporting or shipping Petroleum Substances;

(ii)         tangible property and assets used or intended for use in exploring for, producing, storing, injecting or removing Petroleum Substances;

(iii)        all extensions, additions and accretions to any item described in subparagraphs (i) and (ii) of this definition; and

(iv)       the Wells;

and including all producing, shut–in, injection, disposal, abandoned and other wells, casing, tubing, wellheads, buildings, plants, erections, production equipment, improvements, flowlines, pipelines, pipeline connections, extraction facilities, meters, generators, motors, compressors, separators, gas treating and processing equipment, dehydrators, scrubbers, pumps, refineries, pump jacks, tanks, boilers, communications equipment, enhanced recovery systems and other machinery, apparatus and equipment.

"tax" includes all income, capital, gross receipts, sales, excise, petroleum and gas revenue, value added, goods and services, payroll, use, franchise, profits or property taxes, fees, assessments or charges imposed in accordance with Applicable Law and includes penalties, interest and fines with respect thereto.

"Tax Act" means the Income Tax Act (Canada), including any amendments proposed hereto in any public pronouncement by the Department of Finance of the Government of Canada.

"Tax Pools" means, subject to section 5.1 (rr), the aggregate of the undepreciated capital cost, cumulative Canadian exploration expenses, cumulative Canadian development expenses and Canadian oil and gas property expenses of all of the predecessor corporations of Amalco, all as determined in accordance with the Tax Act and calculated immediately following the relevant Effective Date in respect of each such predecessor on the basis the predecessor had a taxation year end on such Effective Date and used such pools to the extent available to eliminate any income tax payable in respect of such year.

"Tax Pool Value Calculation Example" means the methodology used for calculating tax pool values as used in the example provided in Schedule 2.7.

"Tax Returns" means all returns, prescribed election forms, declarations and reports and information returns and statements required to be filed (taking into account any extension of time to file or send granted to or obtained by any such filing entity) by the Watford Entities, Watford Energy or Amalco under Applicable Law related to tax or in respect of any tax, for any period including or ending on or before the Closing Date.

"Title and Operating Documents" means, in respect of any Petroleum and Natural Gas Rights, Tangibles, or Surface Rights, (i) all of the agreements, contracts, instruments and other documents (including the Leases and all other leases, reservations, permits, licences of all sorts, exploration agreements, operating agreements, unit agreements, pooling agreements, assignments, trust declarations or other agreements to recognize the Watford Entities', Watford Energy's and Amalco's interests, participation agreements, farmin or farmout agreements, royalty agreements, purchase agreements and transfers, (A) gas, oil, condensate and other production sale contracts, (B) gathering, common stream, extraction, transportation, refining and processing agreements, (C) agreements for the construction, ownership and/or operation of Tangibles) by virtue of which such Petroleum and Natural Gas Rights or Tangibles were acquired or constructed or are held or pursuant to which the construction, ownership, operation, exploration, exploitation, extraction, development, production, transportation, refining or marketing of such Petroleum and Natural Gas Rights, Tangibles or Petroleum Substances are subject or which grant rights which are or may be used by the Person in connection therewith, and (ii) the rights (except for Petroleum and Natural Gas Rights) granted under or created by such agreements, contracts, instruments and other documents; but only if the foregoing pertain in whole or part to Petroleum Substances within, upon or under the Lands.

"Vendors' Counsel" means Blake, Cassels & Graydon LLP, Calgary.

"Vendor Hedge Arrangements" means the Agreements for the forward sale of certain natural gas production set forth in Schedule 1.2(j).

"Vendors' Representative" has the meaning ascribed to it in Section 5.5.

"Waterous Arrangement" means all arrangements among the Vendors, the Watford Entities, Watford Energy and Waterous Securities Inc., including the Agreement between the Vendors and Waterous Securities Inc. evidenced by the invoice attached hereto as Schedule 1.2(e).

"Watford Drilling Program" means the program of planned expenditures for the drilling and equipping of certain of the Lands as more completely described in Schedule 1.2(f).

"Watford Effective Date" means 11:59 p.m. on June 30, 2001.

"Watford Effective Date Balance Sheet" means the consolidated balance sheet of Watford Energy, Hiebert Resources Ltd., Grierson Resources Ltd., Wild River Resources Ltd., Maybee Resources Ltd., Hiebert Watford Holdings Ltd., Grierson Watford Holdings Ltd., de Bie Watford Holdings Ltd. and Maybee Watford Holdings Ltd. dated June 30, 2001, prepared in accordance with GAAP, attached as Schedule 1.2(c)(ii).

"Watford Entities" means the corporations identified in Schedule 1.2(b) under the column "Pre-Amalgamation Watford Entities owned by Vendor".

"Watford Effective Date" means 11:59 p.m. on June 30, 2001.

"Watford Financial Statements" means collectively, (i) the consolidated balance sheet of Watford Energy, Hiebert Resources Ltd., Grierson Resources Ltd., Wild River Resources Ltd., Maybee Resources Ltd., Hiebert Watford Holdings Ltd., Grierson Watford Holdings Ltd., de Bie Watford Holdings Ltd. and Maybee Watford Holdings Ltd. as at June 30, 2001 and related consolidated income statements and statements of changes in financial position for the period ending June 30, 2001 and (ii) the Effective Date Balance Sheet and related income statements and statements of cashflow of Watford Energy, Hiebert Resources Ltd., Grierson Resources Ltd., Wild River Resources Ltd., Maybee Resources Ltd., Hiebert Watford Holdings Ltd., Grierson Watford Holdings Ltd., de Bie Watford Holdings Ltd. and Maybee Watford Holdings Ltd. for the 11 months then ended, a copy of which is attached as Schedule 1.2(d).

"Watford Holdcos" means Watford Energy Ltd., Hiebert Resources Ltd., Grierson Resources Ltd., Wild River Resources Ltd., Maybee Resources Ltd., Hiebert Watford Holdings Ltd., Grierson Watford Holdings Ltd., de Bie Watford Holdings Ltd. and Maybee Watford Holdings Ltd.

"Watford Resource Companies" means Hiebert Resources Ltd., Grierson Resources Ltd., Wild River Resources Ltd. and Maybee Resources Ltd.

"Wells" means all producing, suspended, shut-in, abandoned, water source disposal or injection wells located on the Lands or any lands pooled or unitized therewith, including the wells listed in the Land Schedule.

1.2        Schedules

The following Schedules are attached hereto and made part of this Agreement:

(a)	Schedule 1.2(a)	Land Schedule
(b)	Schedule 1.2(b)	List of Shareholders
(c)	Schedule 1.2(c)	(i)  Leland Effective Date Balance Sheet
	Schedule 1.2(c)	(ii)  Watford Effective Date Balance Sheet
(d)	Schedule 1.2(d)	Financial Statements
(e)	Schedule 1.2(e)	Waterous Arrangement
(f)	Schedule 1.2(f)	Watford Drilling Program
(g)	Schedule 1.2(g)	Amalgamation Agreements
(h)	Schedule 1.2(h)	Flow Through Share Agreements
(i)	Schedule 1.2(i)	Flow Through Share Release
(j)	Schedule 1.2(j)	Vendor Hedge Arrangements
(k)	Schedule 1.2(k)	Penalties and Forfeitures, Preferential Rights and Pooling and Unitization Agreements and Plans other than those Included in Title and Operating Documents
(l)	Schedule 1.2(l)	Escrow Agreement
(m)	Schedule 1.2(m)	Confidentiality Agreement
(n)	Schedule 2.7	Tax Pool Value Calculation Example
(o)	Schedule 3.2(a)(x)	Form of Opinion of Vendors' Counsel
(p)	Schedule 3.2(c)	Form of Release
(q)	Schedule 4.2(c)	Policies of Insurance
(r)	Schedule 4.6	Existing Authorizations for Expenditure
(s)	Schedule 4.7	Certain Bonuses
(t)	Schedule 5.1(hh)	Environmental Disclosure
(u)	Schedule 5.1(k)	Current Employees
(v)	Schedule 5.1(t)	Taxes
(w)	Schedule 5.1(z)	Certain Contracts, Agreements, Plans and Commitments
(x)	Schedule 5.1(bb)	AMIs
(y)	Schedule 5.1(gg)	Production Sales Agreements
(z)	Schedule 7.1(g)	Executive Employment and Incentive Agreements
(aa)	Schedule 7.1(h)	Participation Agreements

1.3        References and Headings

The references "hereunder", "herein" and "hereof" refer to the provisions of this Agreement, and references to Article, Sections and Schedules herein refer to articles, sections, or subsections or Schedules of this Agreement. Any reference to time shall refer to Mountain Standard Time or Mountain Daylight Saving Time during the respective intervals in which each is in force in the Province of Alberta.  The headings of the Articles, Sections, Schedules and any other headings, captions or indices herein are inserted for convenience of reference only and shall not be used in any way in construing or interpreting any provision hereof.

1.4        Singular/Plural; Derivatives

Whenever the singular or masculine or neuter is used in this Agreement or in the Schedules, it shall be interpreted as meaning the plural or feminine or body politic or corporate, and vice versa, as the context requires.  Where a term is defined herein, a capitalized derivative of such term shall have a corresponding meaning unless the context otherwise requires.

1.5        Statutory References

Any specific reference to a statute shall include and shall be deemed to be a reference to such statute and to the regulations made pursuant thereto, and all amendments made thereto and enforced from time to time, and to any statute or regulation that may be passed which has the effect of supplementing the statute so referred to or the regulations made pursuant thereto.

1.6        Conflicts

If there is any conflict or inconsistency between a provision of the body of this Agreement and that of a Schedule, the provision of the body of this Agreement shall prevail.

1.7        Accounting References

Where the character or amount of any asset or liability or item of income or expense is required to be determined, or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be done in accordance with GAAP except where the application of such principles is inconsistent with, or limited by, the terms of this Agreement.

1.8        Vendor's Knowledge

Where in this Agreement, or in any certificate or document delivered in connection herewith or to effect any of the transactions contemplated hereby, any statement, representation or warranty is made as to, or as being based on, the awareness, knowledge, information or belief of the Vendors, such awareness, knowledge, information or belief, as applicable, is limited to the actual knowledge of Brian E. Hiebert, Guy C. Grierson, Ian R. de Bie and Gordon A. Maybee.

1.9        Purchaser's Knowledge

Where in this Agreement, or in any certificate or document delivered in connection herewith or to effect any of the transactions contemplated hereby, any statement, representation or warranty is made as to, or as being based on, the awareness, knowledge, information or belief of the Purchaser, such awareness, knowledge, information or belief, as applicable, is limited to the actual knowledge of John Fox, Fred Witsell, Grant Carnie, Gerry Tywoniuk and Michael Hull.

ARTICLE 2
PURCHASE AND SALE OF AMALCO SHARES

2.1        Purchase and Sale of Amalco Shares

Upon the terms and subject to the conditions of this Agreement, the Vendors agree to sell all of the Amalco Shares to the Purchaser and the Purchaser agrees to purchase all of the Amalco Shares from the Vendors.

2.2        Purchase Price and Allocation of Purchase Price

Subject to adjustment in accordance with the terms and conditions of this Agreement, the aggregate consideration to be paid by the Purchaser to the Vendors shall be FORTY-SIX MILLION ONE HUNDRED AND EIGHTY-EIGHT THOUSAND SIX HUNDRED AND FIFTY-EIGHT ($46,188,658.00) Dollars.  Each Vendor shall receive a portion of the Purchase Price equal to the proportion that their respective interest in Amalco set forth in the column titled "Post-Amalgamation Percentage Ownership in Amalco" in Schedule 1.2 bears to the Purchase Price.

2.3        Incremental Adjustment to Purchase Price re Watford Portion

The Purchaser shall pay, in addition to the Purchase Price, an incremental amount to the Vendors, calculated on a daily basis from and including July 1, 2001 to and including the earlier of the Closing Date and August 15, 2001, by multiplying the Interest Rate (expressed as a decimal number) by the amount of the Closing Funds and the number of days during such period and dividing the product obtained thereby by 365.

2.4        Incremental Adjustment to Purchase Price re Leland Portion

The Purchaser shall pay, in addition to the Purchase Price, an incremental amount to the Vendors, calculated on a daily basis from and including June 1, 2001 to and including the earlier of the Closing Date and August 15, 2001, by multiplying the Interest Rate (expressed as a decimal number) by the amount of the Closing Funds and the number of days during such period and dividing the product obtained thereby by 365.

2.5        Deposit

Concurrent with the execution and delivery of this Agreement, the Purchaser shall pay the Deposit to the Vendors' Counsel, who shall invest the Deposit in an interest bearing trust account until Closing. The Deposit and any interest ("Deposit Interest") earned thereon shall be paid to the Party ultimately entitled to the Deposit pursuant to Section 8.3.  The Purchase Price, less the Deposit together with Deposit Interest earned on the Deposit to and including the Closing Date, is herein referred to as the "Closing Funds".

2.6        Adjustments to Purchase Price

(a)         Calculation of Adjustment at Closing:  The Purchase Price shall be increased or decreased on a dollar for dollar basis by the amount by which the Adjusted Working Capital is greater or less than "nil".  If the Adjusted Working Capital:

(i)          exceeds "nil", then the Purchase Price shall be increased by the amount of such excess and the Purchaser shall pay the amount of such excess to the Vendors in accordance with the percentage set opposite each Vendor's name on Schedule 1.2(b) in accordance with Section 2.8; or

(ii)         is less than "nil", then the Purchase Price shall be reduced by the amount of such shortfall and the Vendors shall pay the amount of such shortfall to the Purchaser in accordance with the percentage set opposite each Vendor's name on Schedule 1.2(b).

(b)        Calculation of Adjustment after Closing:  The adjustments to the Purchase Price shall be calculated and paid on the Closing Date, as provided in Section 2.6(a) based on the Effective Date Balance Sheets, which are attached as Schedule 1.2(d). The adjustments to the Purchase Price shall be recalculated and paid based on the final Effective Date Balance Sheets as contemplated in Section 2.6(f).  Any amounts payable by the Purchaser or the Vendors, as applicable, based on the final Effective Date Balance Sheets shall be adjusted to give credit for adjustments paid on the Closing Date pursuant to Section 2.6(a) and any payment due to the Purchase by the Vendors pursuant to this Section 2.6 shall be first paid from the Escrow Amount pursuant to the Escrow Agreement.

(c)         Effective Date Balance Sheets:

(i)          The Effective Date Balance Sheets (which are unaudited) shall be used by the Vendors and Purchaser for the purposes of initially determining the Adjusted Working Capital as at the Closing Date, subject to the adjustments after the Closing Date in accordance with the remaining provisions of this Section 2.6.

(ii)         No later than 75 days after the Closing Date, the Purchasers shall cause the Accounting Firm to prepare and deliver to the Purchaser and the Vendors the final Effective Date Balance Sheets (which shall be audited by the Accounting Firm).  The Purchaser and Vendors shall provide, or cause to be provided, to the Vendors and the Accounting Firm and their agents full (but non-exclusive) access to the relevant records of the Watford Entities, Watford Energy and Amalco to aid in the preparation of such balance sheet.

(d)        Vendors' Objections:  If the Vendor believes that any change is required to be made to the final effective Date Balance Sheets as prepared by the Accounting Firm, they collectively shall, on or before that date (the "Objection Date") which is 7 days after the delivery of the final Effective Date Balance Sheets by the Accounting firm pursuant to Section 2.6(c)(ii), give written notice of any such proposed change, including the reason for such change, to the Purchaser.  In the event that the Vendors do not notify the Purchaser of any proposed change on or before the Objection Date, then the Vendors shall be deemed to have accepted the final Effective Date Balance Sheets.

(e)         Settlement by Arbitrator:  If the Vendor gives written notice of any proposed change on or before the Objection Date or in the event that the Accounting Firm cannot or will not prepare the final Effective Date Balance Sheets in the manner provided above, the Purchaser and the Vendors shall refer the matter of the proposed change requested by the Vendors or of preparing the final Effective Date Balance Sheets, as the case may be, to Arthur Andersen (the "Arbitrator") to arbitrate the dispute as a single arbitrator in accordance with the Arbitration Act (Alberta) within 60 days after the Objection Date.  If Arthur Andersen declines to serve as the Arbitrator and agreement cannot be reached between the Vendors and the Purchaser as to the Arbitrator, a judge of the Court of Queen's Bench (Calgary) shall select either the Purchaser's or Vendors' designate.  The decision of the Arbitrator with respect to any matter in dispute (including as to all procedural matters) shall be final and binding on the Vendors and the Purchaser and shall not be subject to appeal by either Party.  The fees and expenses of the Arbitrator shall be shared, one half to the Purchaser and one half to the Vendors on a pro rata basis.

(f)         Final Effective Date Balance Sheets:  Payment of any adjustment in the Purchase Price as a result of any change between the Effective Date Balance Sheets and the final Effective Date Balance Sheets shall be made to the Vendors (in accordance with the percentage set opposite each Vendor's name in Schedule 1.2(b)) or the Purchaser, as the case may be, together with interest at the rate specified in Section 2.7 calculated from the Closing Date to the date of payment, within 10 Business Days after the delivery of the final Effective Date Balance Sheets, pursuant to Section 2.6(c)(ii) or Section 2.6(e), as applicable.

(g)        Post-Closing Adjustments re: Tax Pools:  The Purchase Price shall be adjusted on a post-Closing basis:

(i)          in favour of the Purchaser, if it is determined that the Tax Pools were less than $5,723,749 or if Tax Pools are re-assessed or re-determined by the relevant taxation authority to an amount less than $5,723,749;

(ii)         in favour of the Vendors, if it is determined that the Tax Pools were in excess of $5,723,749 or if the Tax Pools of Amalco are re-assessed or re-determined by the relevant taxation authority to an amount in excess of $5,723,749;

PROVIDED FURTHER THAT:

(iii)        any such adjustment to the Purchase Price contemplated in this Section 2.6(g) shall be calculated by using the method demonstrated in the Tax Pool Value Calculation Example.  Any such Purchase Price adjustment shall be paid by the Vendors on or before 60 days from the date that a notice is delivered by the Purchaser to the Vendors or by the Vendors to the Purchaser, as the case may be, which notice shall contain the amount claimed by the relevant Party as an adjustment pursuant to this Section 2.6(g) and include a calculation of the claimed adjustment calculated using the method demonstrated in the Tax Pool Value Calculation Example PROVIDED FURTHER THAT any adjustment made to the Purchase Price pursuant to this Section 2.6(g) shall not be included in any calculation or adjustment to the final Effective Date Balance Sheets as contemplated by the other provisions of Section 2.6.

(iv)       any such adjustment to the Purchase Price shall be effected pursuant to the following procedure:

(A)       after closing, any Party may deliver a notice to the other Party requesting an adjustment to the Purchase Price in accordance with Section 2.6(g) (a "Tax Pool Adjustment Notice");

(B)        a Tax Pool Adjustment Notice shall include, at a minimum:

(I)         the amount of the Purchase Price adjustment being requested;

(II)        a summary of the reasons for the requested Purchase Price adjustment including whether the requested Purchase Price adjustment is a result of a miscalculation of the Tax Pools referenced in Section 2.6(g)(i) and 2.6(g)(ii) or if the requested Purchase Price adjustment is a result of a reassessment or re-determination of the Tax Pools by the relevant taxation authority along with details of such reassessment or re-determination; and

(III)       a calculation of the requested Purchase Price adjustment in accordance with the Tax Pool Value Calculation Example.

(C)        in the event that the Party receiving a Tax Pool Adjustment Notice agrees with the requested Purchase Price adjustment as set forth in the Tax Pool Adjustment Notice, it shall pay the requested Purchase Price adjustment to the other Party within 60 days of the date it receives the Tax Pool Adjustment Notice;

(D)        in the event that the Party receiving the Tax Pool Adjustment Notice disagrees with the requested Purchase Price adjustment it shall, on or before that date (the "Tax Pool Objection Date"), within 14 days after the delivery of the Tax Pool Adjustment Notice, give written notice of its objection to the requested Purchase Price adjustment to the other Party.  In the event that the Party receiving the Tax Pool Adjustment Notice does not notify the other Party of its objections on or before the Tax Pool Objective Date, it shall be deemed to have accepted the requested Purchase Price adjustment; and

(E)        if the party receiving the Tax Pool Adjustment Notice gives written notice of its objection to the requested Purchase Price adjustment on or before the Tax Pool Objection Date in the matter provided above, the Parties shall refer the matter of the requested Purchase Price change to Arthur Andersen (the "Arbitrator") to arbitrate the dispute as a single Arbitrator in accordance with the Arbitration Act (Alberta) within 60 days after the Tax Pool Objection Date.  If Arthur Andersen declines to serve as Arbitrator for this purpose, and agreement cannot be reached between the Vendor and the Purchaser as to the Arbitrator, a judge of the Court of Queen’s Bench (Calgary) shall select either the Purchaser’s or the Vendor’s designate.  The decision of the Arbitrator with respect to any matter in dispute (including as to all procedural matters) shall be final and binding on the Parties and shall not be subject to appeal by either Party.  The fees and expenses of the Arbitrator shall be shared, one half to the Purchaser and one half to the Vendor.

2.7        Interest Accrues on Amounts Owing

Any amount owing to a Party by another Party pursuant to any provision of this Agreement after Closing and remaining unpaid shall bear interest calculated daily and not compounded, from the day such amount was due to be paid until the day such amount was paid, at the Interest Rate regardless of whether such Party has given the other Party prior notice of the accrual of interest hereunder.

2.8        Manner of Payment

Unless otherwise specified, all payments made pursuant hereto shall be made by certified cheque, bank draft or wire transfer in immediately available funds.  All amounts to be paid by the Purchaser to the Vendors under this Agreement may be paid by one aggregate payment to Vendors' Counsel in trust for the Vendors as to their respective interests.

ARTICLE 3CLOSING

3.1        Place and Closing Time

Unless otherwise agreed in writing by the Parties, Closing shall take place at the Closing Time at the Place of Closing on the Closing Date.

3.2        Deliveries at Closing

(a)         Vendors' Deliveries to Purchaser:

At Closing, the Vendors shall deliver or shall cause to be delivered the following to the Purchaser:

(i)          a certificate of amalgamation evidencing the amalgamation of the Watford Entities and Watford Energy;

(ii)         certificates representing the Amalco Shares, accompanied by stock transfer powers duly executed in blank or duly executed instruments of transfer, and any other documents necessary to transfer to the Purchaser title to the Amalco Shares;

(iii)        original share books, share ledgers, minute books and corporate seals of the Watford Entities, Watford Energy and Amalco;

(iv)       all books, records, files, reports, data and documents pertaining to the Watford Entities, Watford Energy and Amalco and in the possession or control of the Vendors, including any related to (A) the PNG Assets described in items (i), (iii), (v) and (vi) of the definitions of Miscellaneous Interests, and (B) the Title and Operating Documents.

(v)        a certified copy of resolutions of the board of directors of Amalco authorizing the transfer of the Amalco Shares from the Vendors to the Purchaser as contemplated by this Agreement;

(vi)       resignations or terminations of all directors and officers of Amalco;

(vii)      a release from each Vendor of the Watford Entities, Watford Energy and Amalco of and from any indebtedness, obligation or liability owed by the Watford Entities, Watford Energy or Amalco to such Vendor, including in respect of Shareholder Debt and employment bonuses contemplated in Section 4.7 save and except for such indebtedness which may be or become payable to such Vendor pursuant to this Agreement, the employment agreements  attached hereto as schedule 7.1 (g) or the participation Agreements.

(viii)     the certificates and other documents required by Section 7.1;

(ix)        a receipt for the Purchase Price;

(x)         a legal opinion of Vendors' counsel, or such other counsel as appropriate, substantially in the form as attached hereto as Schedule 3.2(a)(x); and

(xi)        the Flow Through Share Releases;

(xii)       such other documents reasonably required to be delivered by the Vendors at the Closing pursuant to this Agreement.

(b)        Purchaser Deliveries to the Vendors:

At Closing, the Purchaser shall deliver, or cause to be delivered, the following to the Vendors:

(i)          the Closing Funds (as defined in Section 2.5) by way of payment to the Vendors' Counsel in trust for the Vendors as set forth in Section 2.2;

(ii)         the certificates and other documents required by Section7.2; and

(iii)        such other documents as may be reasonably required to be delivered by the Purchaser at Closing pursuant to this Agreement.

(c)         Deliveries by Amalco to the Vendors

At Closing, the Purchaser, as shareholder of Amalco, shall deliver to each Vendor a release, in the form of Schedule 3.2(c) of such Vendor, its Affiliates and those Persons who are their nominees to the board of directors of Amalco of and from all indebtedness, liability and obligations owed by such Vendor, its Affiliates or those Persons who are their nominees to the board of directors of Amalco.

3.3        Escrow of Funds

In order to secure funds required to cover the differences in the adjustments to the Purchase Price determined through the use of the Effective Date Balance Sheets and the adjustments determined after Closing pursuant to Section 2.6, and to pay the indemnity described in Article 10, after the Closing Date, subject to the terms and conditions of this Section 3.3, after the Closing Date, Purchaser's Counsel (the "Escrow Agent") shall hold in trust the sum of One Million ($1,000,000) Dollars, plus any interest earned thereon (collectively the "Escrow Amount"), from the Closing Funds paid at Closing.  The Escrow Amount shall be held and released by the Escrow Agent in accordance with the Escrow Agreement.  To the extent that the Escrow Amount is not sufficient to cover amounts owing to the Purchaser under the Agreement, the Purchaser shall be entitled to recover such amounts from the Vendors in accordance with the terms of this Agreement.  This Section 3.3 shall not in any way limit the rights and remedies of the Purchaser under this Agreement, and the Purchaser may proceed directly against the Vendors in accordance with this Agreement without first claiming against the Escrow Amount.

ARTICLE 4INTERIM PERIOD

4.1        Access

The Vendors, directly or indirectly through the Watford Entities, Watford Energy and Amalco, will cause the Watford Entities, Watford Energy and Amalco to furnish to the Purchaser and its authorized representatives reasonable access during the Interim Period, during the normal business hours, to the properties, books and records (including the PNG Assets of the Watford Entities, Watford Energy and Amalco) and will cause the Watford Entities, Watford Energy and Amalco directly or indirectly, to furnish to the Purchaser and its authorized representatives such additional financial and operating data and other information as the Purchaser may reasonably request.

4.2        Maintenance of Business and PNG Assets

Except as contemplated herein or as otherwise consented to by the Purchaser in writing during the Interim Period (which consent shall not be unreasonably withheld) and subject to Section 4.6, the Vendors directly, or indirectly through the Watford Entities, Watford Energy and Amalco, shall cause each of the Watford Entities, Watford Energy and Amalco to use all reasonable efforts (having regard to the terms and provisions of the Title and Operating Documents and to the nature of the relevant interest in the PNG Assets) to:

(a)         conduct its activities and operations in the ordinary and usual course of its business;

(b)        operate and maintain the PNG Assets in a proper and prudent manner in accordance with generally accepted oil and gas industry practices, the Title and Operating Documents and Applicable Law; and

(c)         maintain the insurance set forth in Schedule 4.2(c) in force with respect to the PNG Assets.

4.3        Certain Changes Restricted

Except as contemplated herein and subject to Sections 4.6 and 4.7, without first obtaining the written consent of the Purchaser (which consent will not be unreasonably withheld), during the Interim Period, the Vendors, directly or indirectly through the Watford Entities, Watford Energy and Amalco shall ensure that each of the Watford Entities, Watford Energy and Amalco do not:

(a)         declare, set aside or pay any dividends, or make any distributions in respect of any Shares or Share Rights, or repurchase, redeem or otherwise acquire any Shares or Share Rights;

(b)        make any payments to the Vendors, or any Affiliate of the Vendors or any other Person in which the Vendors or any of its Affiliates owns any equity securities or ownership interests (other than any repayment of Shareholder Debt and the bonuses shown on the Effective Date Balance Sheets);

(c)         incur any additional Shareholder Debt;

(d)        incur, assume or otherwise become liable for any obligations, debts or charges to the Vendors, or any Affiliate of the Vendors, other than for bona fide advances or payments made to or for the benefit Watford Energy in the ordinary course of business and consistent with past practice;

(e)         other than the Amalgamation, amalgamate with, merge into or with or otherwise consolidate with any other corporation or acquire all or substantially all of the business or assets of any Person;

(f)         make any change in its constating documents or by–laws;

(g)        purchase any securities of any Person except short–term investments made in the ordinary course of business;

(h)        other than pursuant to existing contracts or commitments existing as of the Signing Date as set forth in Schedule 4.3(h), sell, lease or otherwise dispose of any of its PNG Assets (the extraction and sale of petroleum and natural gas and the consumption or other disposition of its assets and properties in the ordinary course of business being excepted);

(i)          other than in the ordinary course of business, purchase, lease or otherwise acquire any interest in petroleum or natural gas, real property or real property interests; or

(j)          grant a Security Interest, other than a Permitted Encumbrance.

(k)         issue any Shares or Share Rights;

(l)          incur any capital expenditures, except in accordance with Section 4.4; or

(m)        except in connection with the Amalgamation or in connection with the transactions contemplated herein, enter into any agreement or commitment to do any of the foregoing items (a) to (m).

4.4        Dealings or Operations re PNG Assets

Except in an emergency in order to prevent loss of life, injury to persons or damage to or loss of property and subject to Section 4.6, during the Interim Period the Vendors, directly or indirectly through the Watford Entities, Watford Energy and Amalco shall not permit the Watford Entities, Watford Energy or Amalco, directly or indirectly, through the Watford Entities, Watford Energy or Amalco, without the prior written consent of the Purchaser (which consent shall not be unreasonably withheld), to:

(a)         voluntarily assume any obligation or commitment with respect to the PNG Assets where in the aggregate, the Watford Entities', Watford Energy's and Amalco's share of the expenditure associated with such obligation or commitment exceeds $25,000;

(b)        surrender or abandon any of the PNG Assets other than in the ordinary course of business;

(c)         amend or terminate any material contracts or agreements applicable to the PNG Assets except in connection with the Amalgamation or as disclosed to the Purchaser prior to Closing.

(d)        propose or initiate the exercise of any right (including bidding rights at Crown sales, rights under area of mutual interest provisions and rights of first refusal) or option relative to, or arising as a result of the ownership of, any of the PNG Assets, or propose or initiate any operations on the Lands which have not commenced or have not been committed to by the Watford Entities or Watford Energy as of the Signing Date, if such exercise or option would result in either an obligation of the Watford Entities, Watford Energy or Amalco after the Signing Date in aggregate in excess of $25,000 or a material adverse effect on the value of any of the PNG Assets; or

(e)         resign, or take any action which would result in its resignation or replacement, as operator of any of the Lands or the Petroleum and Natural Gas Rights.

If the Vendors, the Watford Entities, Watford Energy or Amalco reasonably determines that any such expenditures or actions are necessary to prevent loss of life or injury to persons, damage to or loss of property, the Vendors shall give prompt notice to the Purchaser of such expenditures or actions and the Vendors' or the Watford Entities', Watford Energy's or Amalco's, as applicable, estimate of the costs and expenses expended or to be expended in connection therewith.

4.5        Proposals for Dealings or Operations re PNG Assets

Subject to Section 4.6, if the Watford Entities, Watford Energy or Amalco receives notice of proposed operations, or the exercise of any right or option, respecting the PNG Assets from a third party during the Interim Period in circumstances in which such operation or the exercise of such right or option would require the consent of the Purchaser pursuant to Sections 4.3 or 4.4, the following paragraphs shall apply to such operation or the exercise of such right or option (each a "Proposal"):

(a)         The Vendors, directly or indirectly through the Watford Entities, Watford Energy or Amalco, as applicable, shall give prompt notice of the Proposal to the Purchaser, including with such notice the particulars of such Proposal in reasonable detail, and whether the Watford Entities, Watford Energy or Amalco, as applicable, recommends the exercise of its rights with respect to the Proposal.

(b)        The Purchaser shall, not later than 4 Business Days prior to the time the Watford Entities, Watford Energy or Amalco, as applicable, is required to make its election with respect to the Proposal (the "Election Time"), advise the Vendors, the Watford Entities, Watford Energy or Amalco, as applicable, by written notice, whether it wishes the Watford Entities, Watford Energy or Amalco, as applicable, to exercise its rights with respect to the Proposal, provided that failure of the Purchaser to provide such notice within such period shall be deemed to be an election by the Purchaser to have the Watford Entities, Watford Energy or Amalco, as applicable, proceed with its recommendation with respect to the Proposal as specified in the notice delivered pursuant to Section 4.5(a).

(c)         If the Vendors agree with the proposed response to the Proposal requested by the Purchaser, the Vendors shall cause the Watford Entities, Watford Energy or Amalco, as applicable, to make the election requested by the Purchaser with respect to the Proposal within the period during which the Watford Entities, Watford Energy or Amalco, as applicable, may respond to the Proposal.

(d)        If the Vendors disagree with the proposed response to the Proposal requested by the Purchaser, the Vendors and the Purchaser shall meet at least 2 Business Days prior to the Election Time to discuss their differences.  If consensus is not reached at that meeting, or if the Purchaser refuses to attend the meeting, the Vendors shall have the unilateral right to determine the response of the Watford Entities, Watford Energy or Amalco, as the case may be, to the Proposal and such response shall be binding on the Purchaser.

(e)         A request by the Purchaser not to consent to any Proposal required to preserve the existence of any of the PNG Assets shall not entitle the Purchaser to any reduction of the Purchase Price in the event that Watford Energy’s, any of the Watford Entities' or Amalco's interest therein is terminated or reduced as a result thereof, and such termination or reduction shall be deemed to be a Permitted Defect and shall not constitute a failure of the Vendors’ representations and warranties pertaining to such PNG Assets.

4.6        Existing Authorizations for Expenditure and Watford Drilling Program

Notwithstanding the preceding provisions of this Article 4, the Watford Entities, Watford Energy and Amalco, shall be entitled to conduct those activities and operations arising out of or incidental to the authorizations for expenditures listed in Schedule 4.6 and shall be permitted to conduct all operations required to reasonably complete the Watford Drilling Program.

4.7        Certain Bonuses and Dividends

Notwithstanding the preceding provisions of this Article 4:

(i)          Watford Energy shall be permitted to issue certain bonuses to the individuals listed in Schedule 4.7 in the amounts as set forth in Schedule 4.7 which bonuses have been accrued and noted in the Effective Date Balance Sheets and is therefore accounted for in Adjusted Working Capital.  Such employment bonuses shall be issued by Watford Energy before Closing; and

(ii)         the Watford Resource Companies may declare and pay the capital dividends accrued and noted in the Watford Effective Date Balance Sheets and are therefore accounted for in Adjusted Working Capital; and

(iii)        The Watford Holdcos and the Watford Resource Companies shall be permitted to pay all Shareholder Debt on or before Closing which payments have been accrued and noted in the Effective Date Balance Sheets and are therefore accounted for in Adjusted Working Capital.

4.8        Prohibited Negotiations

Except in connection with the sale of the Amalco Shares to the Purchaser pursuant hereto or as otherwise consented to by the Purchaser in writing, until the earlier of the expiry of the Interim Period or the termination of this Agreement in accordance with the terms hereof, the Vendors shall ensure that neither the Vendors nor any of their Affiliates, including the Watford Entities, Watford Energy and Amalco, nor any of their respective agents and representatives, shall:

(a)         have any further negotiations with other potential purchasers of all or any portion of the Amalco Shares, Shares of or interests in (as applicable) the Watford Entities, Watford Energy or Amalco or all or substantially all the PNG Assets and shall not directly or indirectly initiate, solicit, encourage or accept any other offer or proposal by any Person other than the Purchaser for the purchase or acquisition of all or any portion of the Amalco Shares or shares of the Watford Entities or Watford Energy or all or substantially all the PNG Assets; and

(b)        provide information concerning the Watford Entities', Watford Energy's or Amalco's operations, finances, securities, assets or other business or affairs to any Person in furtherance of any matter pursuant to Section 4.7(a) or in furtherance of any contemplated corporate acquisition or merger.

4.9        Pre-Closing Transaction re Amalgamation

Prior to or concurrent with the Closing, the Vendors shall cause the Amalgamation to be effected in accordance with the terms and conditions of the Amalgamation Agreement.  Each of the Vendors shall vote, or cause to be voted, all of the Shares of the Watford Entities and Watford Energy beneficially owned by them, directly or indirectly, in favour of the Amalgamation, and the Vendors shall not exercise, and shall ensure that each of their Affiliates do not exercise, any rights of dissent they may have in connection with the Amalgamation.

4.10     Insurance

Until the Closing Date, the Vendors shall maintain, or cause the Watford Entities, Watford Energy and Amalco to maintain, policies of insurance and surety bonds in effect at the Signing Date that provide coverage in favour of the Watford Entities, Watford Energy and Amalco, as set forth in Schedule 4.2(c).

ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PARTIES

5.1        Vendors' Representations and Warranties

The Vendors severally and not jointly nor jointly and severally (as further set forth in Section 5.6), represent and warrant to the Purchaser, as of the Signing Date and the Closing Date, or such other date as is specifically referred to in this Section 5.1, acknowledging that the Purchaser is relying upon the same in entering into this Agreement that:

(a)         Standing of Watford Entities, Watford Energy and Amalco:  Each of the Watford Entities, Watford Energy and Amalco:

(i)          is duly organized or continued and validly existing under the laws of its respective governing jurisdiction;

(ii)         has all necessary corporate power and authority to own or lease its properties and assets and to carry on its business as now being conducted by it; and

(iii)        is duly qualified to own or lease its properties and assets and to carry on its business and is up to date with all of its filings required to be made in each jurisdiction in which the nature of the business conducted by it or the character of the properties and assets owned or leased by it makes such qualification necessary.

(b)        Requisite Authority:  Each of the Vendors has the requisite capacity, power and authority to execute this Agreement and the other agreements and documents required to be delivered by it pursuant hereto and to perform the obligations to which it thereby becomes subject.

(c)         Authorization and Enforceability:

(i)          Each of the Vendors has taken all necessary actions to authorize the execution, delivery and performance of this Agreement, and the other agreements and documents required to be delivered by it pursuant hereto, including the sale of the Amalco Shares to the Purchaser in accordance with the provisions of this Agreement.  This Agreement has been duly executed and delivered by the Vendors, and this Agreement constitutes, and all other documents executed and delivered on behalf of the Vendors pursuant hereto shall when executed and delivered constitute, valid and binding obligations of the Vendors enforceable in accordance with their respective terms and conditions, subject to the qualification that such enforceability may be subject to (i) bankruptcy, insolvency, fraudulent preference, reorganization or other laws affecting creditors' rights generally, and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding at equity or law).

(ii)         Amalco at Closing shall have taken all necessary corporate action to authorize the transfer and assignment of the Amalco Shares to the Purchaser in accordance with the provisions of this Agreement.

(d)        No Conflict - Vendors:  The execution and delivery of this Agreement, and the other agreements and documents required to be delivered by a Vendor pursuant hereto, and the completion of the sale of the Amalco Shares to the Purchaser in accordance with the terms of this Agreement are not and will not be in violation or breach of, or be in conflict with or require any consent, authorization or approval under:

(i)          any term or provision of the constating documents of the Watford Entities, Watford Energy or Amalco;

(ii)         any agreement, written or oral to which such Vendor, a Watford Entity which it owns (as set forth in Schedule 1.2(b), Watford Energy or Amalco is bound;

(iii)        any permit or other governmental authorization to which such Vendor or a Watford Entity which it owns (as set forth in Schedule 1.2(b)) or to which Watford Energy or Amalco is a party or by which such Vendor, any such Watford Entity, Watford Energy or Amalco is bound; or

(iv)       any Applicable Law or any judicial order, award, judgement or decree applicable to such Vendor such Watford Entity, Watford Energy or Amalco.

which would be expected to have a material adverse effect on Watford Energy, the Watford Entities and Amalco, taken as a whole.

(e)         No Conflict – Amalco:  The execution and delivery of this Agreement, and the other agreements and documents required to be delivered by each of the Vendors pursuant hereto, and the completion of the sale of the Amalco Shares to the Purchaser in accordance with the terms of this Agreement are not and will not be in violation or breach of, or be in conflict with or require any consent, authorization or approval under:

(i)          any term or provision of the constating documents of the Watford Entities, Watford Energy or Amalco;

(ii)         any agreement, written or oral to which such Vendor, a Watford Entity which it owns (as set forth in Schedule 1.2(b), Watford Energy or Amalco is bound;

(iii)        other than the Title and Operating Documents, any permit or other governmental authorization to which the Watford Entities, Watford Energy or Amalco is a party or by which the Watford Entities, Watford Energy or Amalco is bound; or

(iv)       any Applicable Law or any judicial order, award, judgement or decree applicable to the Watford Entities, Watford Energy or Amalco.

which would be expected to have a material adverse effect on Watford Energy, the Watford Entities and Amalco, taken as a whole.

(f)         Private Companies:  None of Watford Energy or any of the Watford Entities or Amalco are a "reporting issuer" under relevant securities legislation or a "distributing corporation" under relevant corporate legislation.

(g)        Residency For Tax Purposes:  Each Vendor is not a non–resident of Canada within the meaning of the Income Tax Act (Canada).

(h)        Capital of the Watford Entities and Watford Energy: The Vendors are the beneficial owners, directly or indirectly, of all of the issued and outstanding Shares of the Watford Entities and Watford Energy, as set forth in Schedule 1.2(b), and no Person other than the Purchaser under this Agreement has any agreement or option or any right capable of becoming an agreement or option for the purchase from the Vendors of any of the Shares of the Watford Entities and Watford Energy, and no Person has any agreement or option or any right capable of becoming an agreement or option, including convertible securities, warrants or convertible obligations of any nature, for the purchase, subscription or issuance of any unissued Shares of the Watford Entities or Watford Energy or of any Share Rights of the Watford Entities and Watford Energy.

(i)          Authorized and Issued Capital of Amalco:  At the Closing Time, the authorized share capital of Amalco shall consist of an unlimited number of common shares, of which 1,000,000 (being the Amalco Shares), and no others, shall have been validly issued and shall be outstanding as fully paid and non-assessable shares of Amalco, all of which Amalco Shares shall be registered in the names of the Vendors, as set forth in Schedule 1.2(b), and no other shares of Amalco shall be outstanding.

(j)          Title to Amalco Shares:  At the Closing Time, the Vendors will be the registered and beneficial owners of all of the Amalco Shares as set forth opposite their names on Schedule 1.2(b) and will at such time have good and marketable title to such Amalco Shares free and clear of all Security Interests except those of the Purchaser arising pursuant to this Agreement.

(k)         Amalco Shares:  No Person other than the Purchaser under this Agreement has any agreement or option or any right capable of becoming an agreement or option for the purchase from the Vendors of any of the Amalco Shares.

(l)          Options:  No Person has any agreement or option or any right capable of becoming an agreement or option, including convertible securities, warrants or convertible obligations of any nature, for the purchase, subscription or issuance of any unissued Shares of Amalco or of any Share Rights of Amalco.

(m)        Directors/Officers/Employees:  At the Closing Time none of the Watford Entities, Watford Energy or Amalco are or will be a party to any employment, management or consulting agreement or other similar arrangement with its Directors, Officers, employees, consultants or others for which Purchaser or Amalco will have any liability after Closing except for non-written agreements between Watford Energy and the individual employees listed in Schedule 5.1(k) and none of such agreements will require or give any such employee the right to require the payment of any amount to such employees as a result of the completion of the transactions contemplated by this Agreement;

(n)        Books:  The books of account, minute books, share ledgers  and other records of the Watford Entities, Watford Energy and Amalco are complete and accurate in all material respects and have been maintained and will be maintained until Closing in accordance with prudent business practices;

(o)        Financial Condition:  The Financial Statements fairly present the financial condition of the business of each of the Watford Entities and Watford Energy as at the dates thereof, and where such statements have been audited, they have been prepared in accordance with GAAP, consistently applied.  All of the liabilities (actual, contingent or otherwise) that are individually or in the aggregate, material to any Watford Entity or Watford Energy or Amalco, taken as a whole on a consolidated basis are disclosed on, reflected in or provided for in the Financial Statements.  Since the respective dates of the Financial Statements, there has been no material adverse change in the financial condition of the business of each of the Watford Entities and Watford Energy or of the Watford Entities and Watford Energy on a consolidated basis.  There is no reason to believe that any restatement of the Financial Statements may be required based on any material or contingent claim arising subsequent to the respective dates thereof;

(p)        Financial Statements:  The Financial Statements fairly present the financial position of Watford Energy and the Watford Entities as at the respective dates thereof, as well as the results of operations and changes in financial position of Watford Energy and the Watford Entities for the periods covered thereby, as applicable, in accordance with GAAP consistently applied provided that no amounts have been delivered in respect of depreciation and depletion and the accounting policies set out in the notes to such Financial Statements.

(q)        Applicable Law:  To the knowledge of the Vendors, all of the Watford Entities, Watford Energy and Amalco are in compliance with Applicable Law, and none of them have received or delivered any written notices of non-compliance or alleged non-compliance of any provisions of Applicable Law, non–compliance with which would reasonably be expected to affect materially and adversely the business, financial condition or results of operations of the Watford Entities, Watford Energy or Amalco taken as a whole.

(r)         Lawsuits:  None of the Vendors, the Watford Entities, Watford Energy or Amalco is a party to any action, suit or other legal, administrative or arbitration proceeding or government investigation, or any claim, including without limitation claims on account of aboriginal title or treaty rights, which might reasonably be expected to result in a material liability or obligation of the Watford Entities, Watford Energy and Amalco taken as a whole, or the impairment or loss of the Vendors' interest in the Shares or the Watford Entities' or Watford Energy's interest in the PNG Assets or the Watford Entities', or Watford Energys' or Amalcos' interest in the shares of any other corporation held by it, or any part thereof, and there are no circumstances, matters or things which could reasonably be anticipated to give rise to any such action, suit or other legal, administrative or arbitration proceeding or government investigation or claim;

(s)         Kaiser Energy:  As at the Date of Closing, none of the Watford Entities, Watford Energy nor Amalco has any liability or obligation to Kaiser Energy Limited or any of its Affiliates;

(t)         Taxes:  Except as set forth in Schedule 5.1(t):

(i)          Watford Energy, the Watford Entities and Amalco have filed, or will prior to the Closing file, all Tax Returns required to be filed under Applicable Law prior to Closing;

(ii)         Watford Energy, the Watford Entities and Amalco have made complete and accurate disclosure in all Tax Returns filed by Watford Energy, the Watford Entities and Amalco and in all materials accompanying such Tax Returns;

(iii)        Watford Energy, the Watford Entities and Amalco have paid or accrued all taxes due and payable prior to Closing under Applicable Law;

(iv)       Watford Energy, the Watford Entities and Amalco have paid all tax assessments and reassessments and any penalties, interest, fines, governmental charges and other amounts which the relevant authority is entitled to collect from each of the Watford Entities, Watford Energy and Amalco;

(v)        there are no actions, audits, assessments, reassessments, suits, proceedings, investigations or claims now subsisting against Watford Energy, each of the Watford Entities or Amalco in respect of taxes paid or payable by Watford Energy or the Watford Entities;

(vi)       there are no matters which are the subject of any agreement with any governmental authority relating to claims for additional taxes from Watford Energy, each of the Watford Entities or Amalco and nor, to the knowledge of the Vendors, are any such matters under discussion with such authorities;

(vii)      there are no agreements, waivers or other arrangements providing for an extension of time with respect to the assessments or reassessment of any tax or the filing of any Tax Returns by, or the payment of any tax by, or levy of any governmental charge against Watford Energy, the Watford Entities or Amalco; and

(viii)     Each of Watford Energy, the Watford Entities and Amalco have withheld and/or collected from each payment made by it the amount of all taxes and other deductions required to be withheld therefrom and has paid all such amounts due and payable before the date hereof to the proper taxing or other authority within the time prescribed under Applicable Law.

(u)        Title to PNG Assets:  To the knowledge of the Vendors:

(i)          neither the Vendors nor any Watford Entity, Watford Energy nor Amalco has done any act or thing whereby any of that corporation's interest in and to the PNG Assets may be cancelled or determined and the Vendors are not aware of any other act or thing whereby any interest of any Watford Entity, Watford Energy or Amalco in and to the PNG Assets may be cancelled or determined;

(ii)         none of the Watford Entities, Watford Energy nor Amalco has encumbered, granted a Security Interest in or transferred, leased, licensed or otherwise disposed of the PNG Assets or any interest therein, and the Vendors are not aware of any other encumbrance, Security Interest, transfer, license or disposition of the PNG Assets or any interest therein; and

(iii)        the PNG Assets are free and clear of all liens, encumbrances, adverse claims, demands, Security Interests and Royalty Interests created by through or under the Watford Entities, Watford Energy and Amalco and the Vendors are not aware of any liens, encumbrances, adverse claims, demands or royalties otherwise created;

except in each case for Permitted Encumbrances.

(v)        Ownership and Condition of Tangibles:  To the knowledge of the Vendors, the Watford Entities, Watford Energy and Amalco are the beneficial owners of the Tangibles and to the knowledge of the Vendors, the Tangibles have been constructed, installed, maintained and operated in accordance with generally accepted engineering practices and good oil and gas industry practices.

(w)        All Necessary Permits: To the knowledge of the Vendors, the Watford Entities, Watford Energy and Amalco, or the applicable operator, as the case may be, has obtained all necessary permits, licences and authorizations as may be required pursuant to any Applicable Law to own, construct, operate and maintain the PNG Assets.

(x)         Interim Operations:  Since the Leland Effective Date or the Watford Effective Date, as applicable, the PNG Assets have been operated only in the ordinary and normal course of business.

(y)        No Reduction:  To the knowledge of the Vendors and other than as disclosed on the Land Schedule, the interests of the Watford Entities, Watford Energy and Amalco in the PNG Assets are not subject either to reduction on account of actions or omissions taken or omitted by them or conversion or subject to change to an interest of any other size, and the interest of the Watford Entities, Watford Energy and Amalco are not subject to penalty or forfeiture as a result of non-participation in any joint operation.

(z)         Certain Contracts, Agreements, Plans and Commitments:  Except for Title and Operating Documents, there are no contracts or agreements (written or oral) to which any Watford Entity, Watford Energy and Amalco taken as a whole, except for those contracts and agreements set forth in Schedule 5.1(z) and any other schedule attached to this Agreement.

(aa)       Title and Operating Documents:  As of the Closing Date, there are no material Title and Operating Documents relating to PNG Assets operated by the Watford Entities, Watford Energy or Amalco and to the knowledge of the Vendors, as of the Closing Date there are no material Title and Operating Documents relating to PNG Assets not operated by the Watford Entities, Watford Energy or Amalco affecting the Watford Entities', Watford Energy's and Amalco's title to the PNG Assets which are in the possession of Watford Energy, the Vendors, Amalco or Affiliates of the Vendors or the Watford Entities, other than those which have been or will be made available for inspection by the Purchaser pursuant to Sections 4.1 and 6.1 prior to the Closing Date.

(bb)      Breach of Contracts:  To the knowledge of the Vendors, the Watford Entities, Watford Energy and Amalco are not, and no party thereto is, in default under or in breach of any contract, agreement (whether written or oral) indenture or other instrument to which it is a party or by which they are bound, and there exists no set of facts which, after notice or lapse of time or both, would constitute such a default or breach except as such default or breach would not have a material adverse effect upon the Watford Entities, Watford Energy or on Amalco taken as a whole, and to the knowledge of the Vendors, and subject to and limited by applicable bankruptcy, reorganization, arrangement, winding-up, insolvency, liquidation, moratorium, preference and other laws and judicial decisions from time to time in effect affecting the enforcement of rights and remedies of creditors, all such contracts and agreements are valid, binding and enforceable.

(cc)       AMIs:  There are no area of mutual interest provisions applicable to and binding upon Watford Energy, the Watford Entities or Amalco in respect of the PNG Assets or not disclosed to the Purchaser on or before the Signing Date and as set forth on Schedule 5.1(bb).

(dd)      No Hedging Contracts: Except for agreements respecting the firm transportation or the sale of Petroleum Substances which may be cancelled without penalty or liability on notice of not more than 30 days, none of the Watford Entities, Watford Energy or Amalco is party to, and to the knowledge of the Vendors, is subject to any contracts or other arrangements in respect of any future transaction or otherwise providing for options, swaps, floors, caps, collars, forward sales, forward purchases or similar hedging or leveraging transactions of, respecting or otherwise affecting the PNG Assets.

(ee)       No Balancing Agreements:  None of the Watford Entities, Watford Energy or Amalco are parties to and to the knowledge of the Vendors none of the Watford Entities, Watford Energy or Amalco are bound by any agreements or arrangements (commonly known as gas balancing, over production or underlift overlift agreements or arrangements) which are among two or more Persons owning interests in a portion of the Lands or lands pooled or unitized therewith under which Watford Entities, Watford Energy or Amalco are subject to any gas imbalances, nor has there been any circumstance or case whereby one of such persons has taken, or may hereafter take, a share of the production of Petroleum Substances from such lands greater than it would otherwise be entitled to by virtue of its interest in such lands and which excess taking entitles the other persons to a credit in respect of subsequent production from such lands by which the Watford Entities, Watford Energy or Amalco is bound and which pertain to the PNG Assets.

(ff)        Take or Pay Delivery Obligations and Payments:  There are no Take or Pay Delivery Obligations or Take or Pay Payments.

(gg)      Production Sales Agreements:

(i)          Except as described in Schedule 5.1(gg), there are no production sale agreements or arrangements under which the Watford Entities, Watford Energy or Amalco, or any third party acting on behalf of the Watford Entities, Watford Energy or Amalco, is obligated to sell or deliver Petroleum Substances allocable to the Petroleum and Natural Gas Rights, other than contracts which are terminable on not more than thirty (30) days notice.

(ii)         The Watford Entities, Watford Energy and Amalco have not received, and to the knowledge of the Vendors, none of its agents or any applicable operator of the PNG Assets have received written notice of any actual or alleged act or omission which does, or would with the passage of time, constitute a material default of the Watford Entities, Watford Energy or Amalco taken as a whole as seller under any of the production sales agreements referred to in Section 5.1(gg) in a manner that would have a material adverse effect upon the rights of the Watford Entities, Watford Energy and Amalco taken as a whole thereunder.

(hh)      Environmental Matters: To the knowledge of the Vendors, and except as disclosed in Schedule 5.1(hh);

(i)          the Watford Entities, Watford Energy and Amalco or the relevant operator has obtained all permits, licenses and other authorizations which are required under Environmental Law to own or operate the PNG Assets and the failure of which to obtain would have a material adverse effect upon the value or current use or operation of such PNG Assets;

(ii)         the Watford Entities, Watford Energy and Amalco are not in violation of and have not materially violated in connection with the ownership, use, maintenance or operation of the PNG Assets, any Environmental Laws;

(iii)        there are no orders or directions relating to environmental matters requiring any remediation, work, repairs, construction or capital expenditures with respect to the PNG Assets of any of the Watford Entities, Watford Energy and Amalco, and no Environmental Damage has occurred on or within the Lands which affects the PNG Assets;

(iv)       no Hazardous Materials have been released into the Environment, or deposited, discharged, placed or disposed of at, on or near the PNG Assets which would be reasonably likely to lead to liability under any Environmental Law; and

(v)        no notices of any violation of any of the matters referred to in this Section 5.1(hh) relating to the PNG Assets or their use have been received by the Watford Entities, Watford Energy or Amalco.

(ii)         No Default Notices:  None of the Watford Entities, Watford Energy or Amalco has received and, to the knowledge of the Vendors, none of its agents or any applicable operator of the PNG Assets have received any notice of default under the Title and Operating Documents or any notice alleging material default under any other agreement pertaining to any of the PNG Assets which default has not been rectified as of the Signing Date.

(jj)         Authorized Expenditures:  Except as specifically disclosed in Schedule 4.6 and Schedule 4.7, there are no outstanding authorizations for expenditure or outstanding financial commitments in excess of $50,000 respecting the PNG Assets pursuant to which expenditures are or may be required by the Purchaser as a result of the acquisition of Amalco Shares or in respect of which any amount is outstanding in excess of $50,000.

(kk)       No Fees etc.:  Except for any fees payable under the Waterous Arrangement which shall all be for the account of the Vendors, no Vendor has incurred any obligation or liability, contingent or otherwise, for brokers' or finders' fees or commissions with respect to the transactions herein for which the Purchaser, the Watford Entities, Watford Energy and Amalco shall have any obligation or liability.

(ll)         Insurance:  Schedule 4.2(c) sets forth the policies of insurance and insurity bonds that provide coverage in favour of the Watford Entities, Watford Energy or Amalco.

(mm)     Rights of First Refusal:  Except as disclosed on the Land Schedule, there is no right of first refusal or other pre-emptive right applicable to the Amalco Shares, the PNG Assets, or any of them, whereby any Person (other than the Purchaser pursuant to this Agreement), has, as a result of the entering into of this Agreement by the Parties, a right to purchase the Amalco Shares, the PNG Assets, or any of them, at a value determined on the basis provided for in the applicable agreement giving that Person a right of first refusal or other pre-emptive rights.

(nn)      Consulting Agreements:  Each of the Consulting Agreements dated April 1, 1999 entered into between Leland Energy Limited Partnership and any of the Watford Entities, as amended, has been terminated.

(oo)      Gulf Transaction:  None of the Watford Entities, Watford Energy or Amalco has or will have, as the case may be, any liability or be subject to any claims arising out of or in any way connected with the Gulf Transaction.

(pp)      Leakage:  Except as contemplated herein and except as is accounted for in the Effective Date Balance Sheets, since the date of the Effective Date Balance Sheets, none of the Watford Entities, Watford Energy and Amalco have:

(i)          declared, set aside or paid any dividends, or made any distributions in respect of any Shares or Share Rights, or repurchased, redeemed or otherwise acquired any Shares or Share Rights;

(ii)         other than payments in respect of intercompany receivables and payables among the Watford Entities, any payments to any of the Vendors, or any Affiliate of any of the Vendors or any other Person in which any of the Vendors or any of their respective Affiliates owned any equity securities or ownership interests (other than any repayment of Shareholder Debt and the bonuses shown on the Effective Date Balance Sheets);

(iii)        incurred any additional Shareholder Debt;

(iv)       incurred, assumed or otherwise became liable for any obligations, debts or charges to, or entered into any agreement or arrangement with, or granted any security interest to, any of the Vendors, or any Affiliate of any of the Vendors, other than for bona fide advances or payments made to or for the benefit of Watford Energy or among the Watford Entities in the ordinary course of business and consistent with past practice;

(v)        issued any Shares or Share Rights;

(vi)       amended the terms and conditions of any employment, consulting or similar agreements (written or oral) or arrangements;

(vii)      entered into any agreement or commitment to do any of the foregoing items (a) to (f).

(qq)      Shareholder Debt:  None of the Watford Entities, Watford Energy or Amalco have any Shareholder Debt other than as disclosed on the Effective Date Balance Sheets.

(rr)        There have been no renunciations pursuant to any Flow Through Share Agreement to which a predecessor of Amalco is a party effective after the Effective Date in respect of such predecessor other than the following renunciations:

Name	Amount Renounced
Guy Grierson Energy Ltd.	$	117,777
Ian de Bie Energy Ltd.	$	92,539
Brian Hiebert Energy Ltd.	$	117,777
Gord Maybee Energy Ltd.	$	92,539

and the parties acknowledge that such renunciations are to be reflected in the determination of Tax Pools as if the renunciation was effective prior to the relevant Effective Date.

5.2        Purchaser's Representations and Warranties

The Purchaser represents and warrants to the Vendors that:

(a)         Standing: The Purchaser is a corporation, duly organized, validly existing under the laws of its jurisdiction of incorporation, and duly registered, authorized to carry on business in the Province of Alberta.

(b)        Requisite Authority:  The Purchaser has the requisite corporate capacity, power and authority to execute this Agreement and the other agreements and documents required to be delivered hereby and to perform the obligations to which it thereby becomes subject.

(c)         Execution and Enforceability:  The Purchaser has taken all necessary corporate actions to authorize the execution, delivery and performance of this Agreement, including the purchase of the Amalco Shares in accordance with the provisions of this Agreement.  This Agreement has been duly executed and delivered by the Purchaser, and this Agreement constitutes, and all other documents executed and delivered on behalf of the Purchaser hereunder shall, when executed and delivered constitute, valid and binding obligations of the Purchaser enforceable against the Purchaser in accordance with their respective terms and conditions, subject to the qualification that such enforceability may be subject to (i) bankruptcy, insolvency, fraudulent preference, reorganization or other laws affecting creditors' rights generally, and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding at equity or law).

(d)        No Conflict:  The execution and delivery of this Agreement, and the other agreements and documents required to be delivered by it pursuant hereto, and the completion of the purchase of the Amalco Shares by the Purchaser in accordance with the terms of this Agreement are not and will not be in violation or breach of, or be in conflict with or require any consent, authorization or approval under:

(i)          any term or provision of the constating documents of the Purchaser;

(ii)         any permit or authority to which the Purchaser is a party or by which the Purchaser is bound; or

(iii)        Applicable Law or any judicial order, award, judgement or decree applicable to the Purchaser.

(e)         Litigation:  There are no actions, suits or proceedings pending or, to the knowledge of the Purchaser, threatened against the Purchaser seeking relief which would prevent or materially hinder the consummation of the transactions contemplated by this Agreement.

(f)         Investment Canada Act:  The Purchaser is a non-Canadian within the meaning of the Investment Canada Act (Canada).

(g)        Acting as Principal:  The Purchaser is purchasing the Amalco Shares as principal.

(h)        No Fees etc.:  The Purchaser has not incurred any obligation or liability, contingent or otherwise, for brokers' or finders' fees or commissions with respect to the transactions herein for which the Vendors shall have any obligation or liability.

(i)          Representations and Warranties of the Vendors:  The Purchaser has no knowledge of any fact, matter or circumstance that, individually or in the aggregate would render any of the representations or warranties of the Vendors contained in Section 5.1 true or inaccurate in any material respect.

5.3        Survival of Representations and Warranties

Each Party acknowledges that the other may, subject to Article 10, rely on the representations and warranties made by such Party pursuant to Sections 5.1 or 5.2 as the case may be.  The representations and warranties in Sections 5.1 and 5.2 shall be true on the Signing Date and on the Closing Date, and such representations and warranties shall continue in full force and effect and shall survive the Closing Date for the Survival Period applicable thereto for the benefit of the Party for which such representations and warranties were made.

5.4        Survival of Representations and Warranties re Tax

Notwithstanding Section 5.3, the Vendors acknowledge that the Purchaser may, subject to Article 10, rely on the representation and warranty made by the Vendors pursuant to Section 5.1(t).  The representation and warranty in Section 5.1(t) shall be true on the Signing Date and on the Closing Date, and such representation and warranty shall continue in full force and effect and shall survive the Closing Date for the entire reassessment period set forth in the Tax Act for the benefit of the Purchaser.

5.5        No Additional Representations Or Warranties By Vendors

Except as and to the extent set forth in Section 5.1, the Vendors make no representations or warranties whatsoever, and disclaim all liability and responsibility for any representation, warranty, statement or information made or communicated (orally or in writing) to the Purchaser (including any opinion, information or advice which may have been provided to the Purchaser by any officer, shareholder, director, employee, agent, consultant or representative of Watford Energy, the Watford Entities, the Vendors, Affiliates of the Vendors, Waterous Securities Inc., the Vendors' Counsel or any other agent, consultant, representative or Person, collectively referred to as the "Vendors' Representatives").  Without limiting the generality of the foregoing, except as and to the extent, if any, set forth in Section 5.1, the Vendor makes no representations or warranties as to:

(a)         title to any of Watford Energy or the Watford Entities' interests in any properties or assets, including the PNG Assets;

(b)        the quantity, quality or recoverability of Petroleum Substances respecting the Lands;

(c)         any estimates of the value of the PNG Assets, or the revenues applicable to future production from the Lands;

(d)        any engineering, geological, environmental or other interpretations or economic evaluations respecting the PNG Assets;

(e)         the rates of production of Petroleum Substances from the Lands;

(f)         the quality, condition or serviceability of the PNG Assets;

(g)        the suitability of any of the PNG Assets for use for any purpose; or

(h)        any information provided or made available to the Purchaser by the Vendors, Watford Energy, the Watford Entities or the Vendors' Representatives including the Title and Operating Documents, the Financial Statements, any engineering report or update, books, accounts, records, minute books, Tax Returns and filings and other information and documents of each of Watford Energy, the Watford Entities and the Vendors.

5.6        No Merger

The representations and warranties in Sections 5.1 and 5.2 shall be deemed to apply to all transfers, assignments and other documents conveying any of the Amalco Shares from the Vendors to the Purchaser.  Until the end of the Survival Period applicable thereto, and in the case of the representations and warranties in Section 5.1(t), such period indicated in Section 5.4, there shall not be any merger of any of such representations or warranties in such assignments, transfers or other documents, notwithstanding any rule of law, equity or statute to the contrary, and all such rules are hereby waived.

5.7        Several Obligations of Vendors

Each Vendor shall bear all obligations and liabilities (including indemnities) created pursuant to or as a direct or indirect result of the operation of this Agreement in proportion to its respective interest in the Watford Entity or Watford Entities, Watford Energy or Amalco to which such obligations or liabilities are attributable.  In the event that it is not possible to attribute such an obligation or liability to a specific Watford Entity, each of the Vendors shall severally bear all such obligations in proportion to their respective post Amalgamation interests in Amalco as set forth in Schedule 12(b).

ARTICLE 6
ACCESS TO PNG ASSETS

6.1        Vendors To Provide Access to PNG Assets

The access afforded to the Purchaser and its representatives pursuant to Section 4.1shall include:

(a)         access to records, files, reports, data and documents in Calgary, Alberta, directly or indirectly relating to the PNG Assets, during normal business hours, for the purpose of the Purchaser's review of the PNG Assets and the title of the Watford Entities, Watford Energy and Amalco thereto and investigation of the business and condition (financial or otherwise) of the Watford Entities, Watford Energy and Amalco, including:

(i)          all operating, technical, financial and environmental data and information, including the Watford Entities', Watford Energy's and Amalco's minute books, books of account, tax records and technology; and

(ii)         the PNG Assets as respectively described in items (i), (ii), (iii), (v) and (vi) of the definition of Miscellaneous Interests; and

(b)        a reasonable opportunity to conduct a physical inspection of the PNG Assets (including the Wells, Tangibles and surface areas included therein or associated therewith) at the Purchaser's sole cost, risk and expense, insofar as the Vendors can cause, pursuant to the Title and Operating Documents, any third party to reasonably provide such access to the PNG Assets;

provided that access to all such information and data described in this Section 6.1 shall be subject to the restrictions described in Section 4.1.

ARTICLE 7
CONDITIONS TO CLOSING

7.1        Conditions to the Obligations of the Purchaser

The obligation of the Purchaser to complete the purchase of the Amalco Shares from the Vendors, is subject to the fulfilment, on or prior to the Closing Date, of the following conditions precedent:

(a)         Representations and Warranties:  All representations and warranties of the Vendors contained in this Agreement shall be true at and as of the Signing Date and the Closing Date as if made then in each case, except for inaccuracies which are not in the aggregate material, and a certificate to that effect from the Vendors shall have been delivered to the Purchaser.

(b)        Covenants and Agreements:  The Vendors shall have complied with and performed in all material respects all covenants and agreements required by this Agreement to be complied with and performed by the Vendors at or prior to the Closing Date and a certificate to that effect from the Vendors shall have been delivered to the Purchaser.

(c)         Amalgamation:  The Amalgamation shall have been completed in accordance with the terms and conditions of the Amalgamation Agreement, and otherwise to the satisfaction of the Purchaser, acting reasonably.

(d)        Shareholder Debt:  There shall be no Shareholder Debt.

(e)         ATB Debt:  None of the Watford Entities, Watford Energy or Amalco shall have any indebtedness or liability to Alberta Treasury Branch, Bank of Montreal or any financial institution and all Security Interests relating to any such indebtedness shall have been released and discharged.

(f)         Kaiser Receivable:  All amounts owing by Kaiser Energy Limited or any of its Affiliates to the Watford Entities, Watford Energy or Amalco shall have been paid and collected.

(g)        Employment Agreements:  Each of Brian Hiebert, Guy Grierson, Ian de Bie and Gordon Maybee shall have entered into an employment agreement with Purchaser in the form attached as Schedule 7.1(g).

(h)        Participation Agreements:  Each of Brian Hiebert, Guy Grierson, Ian de Bie and Gordon Maybee (or wholly owned corporations owned by each of them) shall have entered into a joint venture agreement with Purchaser in the form attached as Schedule7.1(h).

(i)          Termination of Flow-Through Shares:  There shall been no renunciations under the Flow Through Agreements that would reduce the Tax Pools of Amalco below $5,600,000 and all Flow Through Agreements shall have been terminated by delivery by each of the holders thereof of an executed Flow Through Release.

(j)          Merger Agreement:  The Merger Agreement dated effective the 1^st day of April, 1999, as amended, among Leland Energy Ltd., Kaiser Energy Ltd., 808715 Alberta Ltd., 808719 Alberta Ltd., 808721 Alberta Ltd., 831685 Alberta Ltd., Brian Hiebert, Ian de Bie, Guy Grierson, Gordon Maybee shall have been terminated with no continuing liability or obligation of the Watford Entities, Watford Energy, Amalco, Brian Hiebert, Ian de Bie, Guy Grierson or Gordon Maybee thereunder or in connection therewith, and an agreement effecting such termination, in form and substance satisfactory to the Purchaser, shall have been delivered to the Purchaser.

(k)         Closing Deliveries: The Purchaser shall have received delivery of all documents required to be delivered by the Vendors pursuant to Sections 3.2(a).

(l)          Outside Date:  The Closing shall have occurred not later than the Outside Date.

(m)        Kaiser Sale:  The transaction contemplated by the Share Purchase Agreement dated August 10, 2001 between Kaiser Energy Limited, as Vendor and the Purchaser, as Purchaser shall have been concluded.

(n)        No Material Adverse Change:  after having taken into account any material positive change to the PNG Assets and the business, liabilities and financial conditions of the Watford Entities, Watford Energy and Amalco since April 1, 2001 to the Closing Date, there shall have been no material adverse change since April 1, 2001 to the Closing Date to any of the PNG Assets (other than production of Petroleum Substances in the ordinary course) or to the business, liabilities, financial conditions of the Watford Entities, Watford Energy or Amalco, taken as a whole except for matters and risks which are generally applicable to the oil and gas industry in Canada (including, without limitation, fluctuations in commodity prices and fluctuations in currency or interest rates) and any matter, fact or circumstance disclosed in any schedule attached to this Agreement.

(o)        Dissent Rights:  No shareholder of any of the Watford Entities or Watford Energy shall have exercised any dissent rights under Applicable Law in connection with the Amalgamation and a certificate to that effect from the Vendors shall have been delivered to the Purchaser.

7.2        Conditions to the Obligations of Vendors to Close

The obligation of the Vendors to complete the sale of the Amalco Shares to the Purchaser, is subject to the satisfaction at or prior to the Closing Date of the following conditions precedent:

(a)         Representations and Warranties: All representations and warranties of the Purchaser contained in this Agreement shall be true at and as of the Signing Date and the Closing Date as if made then in each case, except for inaccuracies which are not in the aggregate material, and a certificate to that effect from the Purchaser shall have been delivered to the Vendors.

(b)        Covenants and Agreements: The Purchaser shall have complied with and performed in all material respects all covenants and agreements required by this Agreement to be complied with and performed by the Purchaser at or prior to the Closing Date and a certificate to that effect from the Purchaser shall have been delivered to the Vendors.

(c)         Kaiser Sale:  The transaction contemplated by the Share Purchase Agreement dated August 9, 2001 between Kaiser Energy Limited, as Vendor and the Purchaser as Purchaser shall have been concluded.

(d)        Closing Deliveries: The Vendors shall have received delivery of all documents required to be delivered by the Purchaser pursuant to Section 3.2(b).

(e)         Outside Date: The Closing shall have occurred not later than the Outside Date.

7.3        Parties To Exercise Diligence With Respect To Conditions, etc.

Each Party shall proceed diligently, honestly and in good faith and use all reasonable efforts with respect to all matters within its control to satisfy the conditions referred to in Sections 7.1 and 7.2. In particular:

(a)         The Vendors and the Purchaser shall each use all of their respective reasonable efforts, and shall cooperate with each other, to make and obtain all governmental and regulatory filings, approvals and consents as may be or become necessary for or in connection with the consummation of the transactions contemplated by this Agreement, including the Purchaser and the Vendors shall cooperate to make reasonable efforts to respond to any governmental request or inquiry with respect thereto, but none of the Purchaser or the Vendors, or any of their Affiliates, shall be required to make any payment (other than for reasonable legal fees) that it is not presently contractually required to make, divest any assets, make any change in the conduct of its business, accept any limitation on the future conduct of its business, enter into any other agreement or arrangement with any Person that it is not presently contractually required to enter into, accept any significant modification in any existing agreement or arrangement, or agree to any of the foregoing, or to litigate or participate in administrative actions regarding such filings.

(b)        The Purchaser will, at the reasonable request of the Vendors, from time to time during the Interim Period, provide the Vendors and their representatives with copies of all applications, filings, notifications, submissions and other correspondence or documents (including drafts thereof) related to the satisfaction of the conditions to Closing together with such written advice and information with respect to the status of the Purchaser's efforts to obtain the satisfaction of the conditions to Closing as the Vendors may reasonably request.

7.4        Waiver Of Conditions

The conditions in Section 7.1 are for the sole benefit of the Purchaser and the conditions in Section7.2 are for the sole benefit of the Vendor.  The Party for the benefit of which such conditions have been included may waive any of them, in whole or in part, by written notice to the other Party.

7.5        Failure To Satisfy Conditions

If any of the conditions in Sections 7.1 or 7.2 has not been satisfied at or before the Outside Date and such condition has not been waived by the Party for the benefit of which such condition has been included, such Party may terminate this Agreement pursuant to Section 8.1 by written notice to the other Party prior to the Closing.

ARTICLE 8TERMINATION

8.1        Grounds for Termination

This Agreement may be terminated prior to the Outside Date:

(a)         by the mutual written agreement of the Vendors and the Purchaser;

(b)        in accordance with Section 7.5 by the Party and in the circumstances contemplated thereby; or

(c)         by the Vendors or the Purchaser if the consummation of the transaction contemplated by this Agreement would violate any non-appealable final order, decree or judgment of any court or governmental body having competent jurisdiction;

(d)        by the Purchaser in the event that a material adverse change occurs in the PNG Assets or in assets, liabilities, or operations of the Watford Entities, Watford Energy or Amalco after the Signing Date, as the case may be;

provided that, notwithstanding anything to the contrary express or implied herein, a Party shall not be allowed to exercise any right of termination pursuant to this Section 8.1 if the event giving rise to such right is due to a Purchase Agreement Default by such Party.

8.2        Effect of Termination

If this Agreement is terminated by a Party as permitted under Section 8.1 hereof:

(a)         except as contemplated by this Section 8.2 and Section 8.3, such termination shall be without liability of any Party to any other Party to this Agreement, or to any of their shareholders, directors, officers, employees, agents, consultants or representatives, and the Parties shall be released from all of their obligations under this Agreement;

(b)        subject to Section 8.2(c), if such termination shall result from or relate to a Purchase Agreement Default of a Party, such Party shall not be released from such Purchase Agreement Default and shall be fully liable (in the case of the Vendors, on a several and not joint liability basis in accordance with Section 10.4(a)) for any and all losses, costs, damages (excluding consequential damages), expenses, charges, fines, penalties, assessments or other liabilities sustained or incurred by the other Party or Parties directly or indirectly as a result thereof;

(c)         Section 8.2(b) shall not apply to termination by the Purchaser for a Purchase Agreement Default of the Vendors that arises as a result of a misrepresentation or breach of warranty made by any one or more of the Vendors under Section 5.1 which misrepresentation is beyond their reasonable control or a failure of any one or more of the Vendors to perform or observe in any material respect any of the covenants or agreements to be performed by any one or more of the Vendors which are beyond their reasonable control; and

(d)        the Purchaser shall promptly destroy or return to the Vendors all materials delivered to the Purchaser by the Vendors hereunder, together with all copies of them that may have been made by or for the Purchaser.

8.3        Entitlement to Deposit on Termination

If this Agreement is terminated pursuant to Section 8.1  and the event giving rise to the termination is not due to the Purchase Agreement Default of the Purchaser, then the Deposit provided for in Section 2.4 shall be returned to the Purchaser, together with Deposit Interest earned thereon.  However, if the Agreement is terminated pursuant to Section 10.4 prior to Closing as a result of a Purchase Agreement Default by the Purchaser, then such Deposit, together with the Deposit Interest earned thereon, shall be retained by the Vendors and applied by the Vendors as their sole remedy on account of their damages contemplated by Section 8.2 as a genuine pre-estimate of the Vendors' minimum liquidated damages and not as a penalty.

ARTICLE 9
INFORMATION, MATERIALS AND CONTINUING REPORTS

9.1        Access to Information

After the Closing Date, the Vendors may upon reasonable notice to the Purchaser and subject to contractual restrictions relative to disclosure, have access during business hours to the Title and Operating Documents, any engineering report, the Financial Statements and the financial statements, books, accounts, records, minute books, Tax Returns, tax assessments, filings, maps, documents, files, information and materials of the Watford Entities, Watford Energy and Amalco delivered to the Purchaser pursuant to the terms hereof and to obtain and copy information in respect of matters arising out of or relating to any period of time through the Closing if copies of such records or if the information derived from such access would be helpful and beneficial to the Vendors:

(i)          in connection with audits;

(ii)         in connection with the Vendors' dealings with taxing and other regulatory authorities;

(iii)        to comply with Applicable Law;

(iv)       in connection with any action, suit or proceeding commenced or threatened by the Watford Entities, Watford Energy, Amalco, the Purchaser, or any third Person against the Vendors, their Affiliates or its or their respective directors, officers, employees, agents, solicitors, engineers, accountants and consultants for which the Vendors or their Affiliates may have any liability.

9.2        Tax Returns

The Vendors shall, on a timely basis,  prepare and file all Tax Returns and forms for taxes applicable to the Watford Entities, Watford Energy and Amalco for periods ending on or before the Closing Date, subject to review and approval (which approval shall not be unreasonably withheld) by the Purchaser, and the Purchaser shall provide the Vendors reasonable access to all information required to do so on a timely basis.

ARTICLE 10
LIABILITY AND INDEMNIFICATION

10.1     Defined Terms

In this Article 10:

"Additional Indemnitees" means, with respect to any Person to which an indemnity is granted pursuant to this Article 10, its Affiliates and the respective directors, officers, servants, agents, representatives, advisors and employees of that Person and its Affiliates.

"Indemnified Losses" means all losses, costs, damages, expenses, charges, fines, penalties, assessments or other liabilities whatsoever, but does not include consequential, incidental, economic or punitive losses, damages or claims.

"Notice of Claim" means a notice by the Vendors or the Purchaser, as applicable, on behalf of itself or one or more Additional Indemnities (if applicable) of a claim for Indemnified Losses pursuant to Section 10.2, or 10.3 as applicable, together with detailed particulars as to the nature and amount of the claim, the basis which it is sought and the provisions of this Agreement applicable to such claim.

10.2     Responsibility of Vendors

Subject to the limitations set forth herein, the Vendors shall:

(a)         be liable to the Purchaser and their Additional Indemnitees for all Indemnified Losses which any one or more of them may suffer, sustain, pay or incur; and

(b)        indemnify and save harmless the Purchaser and their Additional Indemnitees from and against all Indemnified Losses which may be brought against or suffered by any one or more of them or which any one or more of them may sustain, pay or incur;

as a direct result of any act, omission, circumstance or other matter arising out of, resulting from, attributable to or connected with any Purchase Agreement Default made by the Vendors.

10.3     Responsibility of Purchaser

Subject to the limitations set forth herein, the Purchaser shall:

(a)         be liable to the Vendors and their Additional Indemnitees for all Indemnified Losses which any one or more of them may suffer, sustain, pay or incur; and

(b)        indemnify and save harmless the Vendors and their Additional Indemnitees from and against all Indemnified Losses which may be brought against or suffered by any one or more of them or which any one or more of them may sustain, pay or incur;

as a direct result of any act, omission, circumstance or other matter arising out of, resulting from, attributable to or connected with any Purchase Agreement Default made by the Purchaser.

10.4     Limit on Vendors' Responsibility

The Vendors' obligations and liability under this Agreement shall be subject to the following limitations:

(a)         The Vendors shall have no liability in connection with any Indemnified Losses until the aggregate of such claims exceeds Seven Hundred and Fifty Thousand ($750,000.00) Dollars and, upon the aggregate of such claims exceeding Seven Hundred and Fifty Thousand ($750,000.00) Dollars, the Vendors shall be required to indemnify in respect of only the amount of such Indemnified Losses to the extent they aggregate in excess of One Hundred and Fifty Thousand ($150,000.00) Dollars PROVIDED THAT any Indemnified Losses arising out of the Vendor's representation and warranty in Section 5.1(pp) shall not be subject to this Section 10.4(a).

(b)        Subject to Sections 10.4(c) and 10.4(d):

(i)          the obligations and liabilities of the Vendors hereunder are several and not joint, nor joint and several;

(ii)         each Vendor shall bear all obligations and liabilities of the Vendors in the manner prescribed in Section 5.7; and

(iii)        the maximum liability of any single Vendor under this Agreement, including any claims for Indemnified Losses, shall be the portion of the Purchase Price (prior to adjustments) paid to such Vendor at Closing;

(c)         The obligations of the Vendors hereunder resulting from a breach by any of the Vendors in the representations and warranties contained in Sections 5.1(b), 5.1(i), 5.1(j), 5.1(k) and 5.1(l) shall be joint and several.

(d)        The obligations of the Vendors hereunder resulting from a breach by any of the Vendors of any of their respective obligations under Section 2.6(g) shall not be subject to 10.4(a).

(e)         If this Agreement is terminated prior to the Closing Date by the Purchaser pursuant to Section 8.1 the Vendors shall have no liability for Indemnified Losses arising out of, resulting from, attributable to or connected with those Purchase Agreement Defaults referred to in Section 8.2(c).

(f)         No Vendor shall have any liability in connection with Indemnified Losses unless the Purchaser shall, prior to the expiry of the Survival Period, or in the case of the representation and warranty in Section 5.4, such period indicated in Section 5.4, have provided such Party with a Notice of Claim.

10.5     Responsibility Extends To Legal Costs and Settlements

Notwithstanding any provision to the contrary contained in this Article 10 references to costs in the liability and indemnification obligations prescribed by Sections 10.2 and 10.3 shall be deemed to include legal (on a solicitor-client basis) and other professional fees and disbursements on a full indemnity basis, and shall extend to settlements, satisfactions or other compromises with respect to claims by third Persons for Indemnified Losses.

10.6     Limitations

Notwithstanding anything herein to the contrary:

(a)         The indemnities provided in Sections 10.2 and 10.3 shall not apply to the extent that claims for Indemnified Losses are reimbursed to the Person to be indemnified by insurance.

(b)        If Indemnified Losses suffered, sustained, paid or incurred by Persons claiming indemnity at any time before or subsequent to the making of an indemnity payment are reduced by any tax benefit or recovery, the amount of such reduction, together with Interest thereon from the date of payment thereof, shall promptly be paid by the Person claiming indemnity to the indemnifying party.

10.7     Limitation on Rights or Remedies

(a)         This Article 10, together with sections 2.6, 3.3, Article 7 and Article 8 sets forth the sole rights and remedies of each Party and its Additional Indemnitees in connection with (i) the transactions contemplated herein, and (ii) any act, omission, circumstance or other matter arising out of, resulting from, attributable to or connected with any Purchase Agreement Default made by the other Party, and such first mentioned Party and its Additional Indemnitees shall have no further right or remedy (whether legal, equitable, fiduciary or in tort) whatsoever, against the other Party, or its Affiliates or their respective directors, officers, servants, agents, advisors or employees.

(b)        The Purchaser acknowledges that it shall not be entitled to any rights or remedies as against the Vendors, their Affiliates or their respective directors, officers, servants, agents and employees under Applicable Law, including common law or in equity, pertaining to any Indemnified Losses, in respect of which it is required to indemnify the Vendors pursuant to Section 10.2 or 10.3, as applicable, and that it shall not be entitled to name the Vendors or their Affiliates or their respective directors, officers, servants, agents and employees under Section10.2 or 10.3, as applicable, as third party to any action pertaining or relating to any Indemnified Losses in respect of which it is required to indemnify the Vendors pursuant to Sections 10.2 or 10.3,  commenced by any third Person against the Purchaser, the Watford Entities or Watford Energy, as the case may be.

10.8     Notice of Claim

In the event that an indemnified party (the "Indemnified Party") shall become aware of any claim, proceeding or other matter (a "Claim") in respect of which the Vendors or the Purchaser (the "Indemnifying Party") agreed to indemnify the Indemnified Party pursuant to this Agreement, the Indemnified Party shall promptly give written notice thereof to the Indemnifying Party.  Such notice shall specify whether the Claim arises as a result of a claim by a person against the Indemnified Party (a "Third Party Claim") or whether the Claim does not so arise (a "Direct Claim"), and shall also specify with reasonable particularity (to the extent that the information is available) the factual basis for the Claim and the amount of the Claim, if known.

10.9     Direct Claims

With respect to any Direct Claim, following receipt of notice from the Indemnified Party of the Claim, the Indemnifying Party shall have 60 days to make such investigation of the Claim as is considered necessary or desirable.  For the purpose of such investigation, the Indemnified Party shall make available to the Indemnifying Party the information relied upon by the Indemnified Party to substantiate the Claim, together with all such other information as the Indemnifying Party may reasonably request.  If both parties agree at or prior to the expiration of such 60 day period (or any mutually agreed upon extension thereof) to the validity and amount of such Claim, the Indemnifying Party shall immediately pay to the Indemnified Party the full agreed upon amount of the Claim, failing which the matter shall be referred to binding arbitration in such manner as the parties may agree or shall be determined by a court of competent jurisdiction.  To the extent that there are funds in the possession of the Escrow Agent, the Purchaser shall be entitled to recover amounts owing to it by the Vendors from the Escrow Amount or otherwise.

10.10   Third Party Claims

With respect to any Third Party Claim, the Indemnifying Party shall have the right, at its expense, to participate in or assume control of the negotiation, settlement or defence of the Claim and, in such event, the Indemnifying Party shall reimburse the Indemnified Party for all the Indemnified Party's out-of-pocket expenses as a result of such participation or assumption.  If the Indemnifying Party elects to assume such control, the Indemnified Party shall have the right to participate in the negotiation, settlement or defence of such Third Party Claim and to retain counsel to act on its behalf, provided that the fees and disbursements of such counsel shall be paid by the Indemnified Party unless the Indemnifying Party consents to the retention of such counsel or unless the named parties to any action or proceedings include both the Indemnifying Party and the Indemnified Party and a representation of both the Indemnifying Party and the Indemnified Party by the same counsel would be inappropriate due to the actual or potential differing interests between them (such as the availability of different defences).  If the Indemnifying Party, having elected to assume such control, thereafter fails to defend the Third Party Claim within a reasonable time, the Indemnified Party shall be bound by the results obtained by the Indemnified Party with respect to such Third Party Claim.  If any Third Party Claim is of a nature such that the Indemnified Party is required by applicable law to make a payment to any person (a "Third Party") with respect to the Third Party Claim before the completion of settlement negotiations or related legal proceedings, the Indemnified Party may make such payment and the Indemnifying Party shall, forthwith after demand by the Indemnified Party, reimburse the Indemnified Party for such payment.  If the amount of any liability of the Indemnified Party under the Third Party Claim in respect of which such payment was made, as finally determined, is less than the amount that was paid by the Indemnifying Party to the Indemnified Party, the Indemnified Party shall forthwith after receipt of the difference from the Third Party, pay the amount of such difference to the Indemnifying Party.

10.11   Settlement of Third Party Claims

If the Indemnifying Party fails to assume control of the defence of any Third Party Claim, the Indemnified Party shall have the exclusive right to contest, settle or pay the amount claimed.  Whether or not the Indemnifying Party assumes control of the negotiation, settlement or defence of any Third Party Claim, the Indemnifying Party shall not settle any Third Party Claim without the written consent of the Indemnified Party, which consent shall not be unreasonably withheld or delayed.

10.12   No Merger of Legal Responsibilities

The liabilities and indemnities created in this Article 10 shall be deemed to apply to, and shall not merge in, all assignments, transfer and other documents conveying any of the Amalco Shares to the Purchaser, notwithstanding the terms of such assignments, transfers, conveyances, novations and other documents, Applicable Law or any rule of law or equity to the contrary, and all such rules are hereby waived.

ARTICLE 11ARBITRATION

11.1     Reference to Arbitration

(a)         Insofar as the Parties are unable to agree on any matter which expressly may be referred to arbitration hereunder, either Party may serve the other Party written notice that it wishes such matter referred to arbitration.

(b)        The Parties shall meet within 7 days of the receipt of a notice issued pursuant to Section 11.1(a) to attempt to agree on a single arbitrator qualified by experience, education and training, to determine such matter.  If the Parties are unable to agree on the selection of the arbitrator, the Party which issued such notice shall forthwith make application to a judge of the Court of Queen's Bench of the Province of Alberta pursuant to the Arbitration Act (Alberta) for the appointment of a single arbitrator, and failing such action on the part of the Party which issued such notice, the other Party may make such application.

11.2     Reference to Arbitration

(a)         The arbitrator selected pursuant to Section 11.1 shall proceed as soon as is practicable to hear and determine the matter in dispute, and shall be directed to provide a written decision respecting such matter within 45 days of appointment.  The Parties shall provide such assistance and information as may be reasonably necessary to enable the arbitrator to determine such matter.

(b)        Except to the extent modified in this Article, the arbitrator shall conduct any arbitration hereunder pursuant to the provisions of the Arbitration Act (Alberta).

(c)         The liability between the Parties for the payment of the compensation and expenses of the arbitrator shall be determined by the arbitrator.

ARTICLE 12
CONFIDENTIALITY OF THE PURCHASER AND PRESS RELEASE

12.1     Return of Documents

If Closing does not occur and this Agreement is terminated, then all documents, working papers and other written material obtained from the Vendors, the Watford Entities or Watford Energy in connection with this Agreement shall be returned to the Vendors, the Watford Entities or Watford Energy, as the case may be, forthwith.  No copies of such information are to be retained by the Purchaser.

12.2     Press Release

The parties agree that, notwithstanding the Confidentiality Agreements, the Purchaser may issue press releases and make such filings as are necessary or desirable under the securities laws or the applicable stock exchange regulations with respect to the Closing, and the parties hereby waive any rights they may have under the Confidentiality Agreements to the extent necessary to permit such press releases and securities filings to be issued.

ARTICLE 13
MISCELLANEOUS PROVISIONS

13.1     Waiver Must Be In Writing

No waiver by any Party of any breach (whether actual or anticipated) of any of the terms, conditions, representations or warranties contained herein shall take effect or be binding upon that Party unless the waiver is expressed in writing under the authority of that Party. Any waiver so given shall extend only to the particular breach so waived and shall not limit or affect any rights with respect to any other or future breach.

13.2     No Amendment Except In Writing

This Agreement may be amended only by written instrument executed by the Vendors and the Purchaser.

13.3     Assignments Before Closing

Prior to Closing, no Party may assign its interest in or under this Agreement without the prior written consent of the other Parties, provided however that the Purchaser may assign its interest in or under this Agreement to an Affiliate without the prior written consent of the Vendors providing however that the Purchaser shall continue to be liable to the Vendors in the event of a Purchase Agreement Default by such assignee.

13.4     Service Of Notice

Notwithstanding anything to the contrary contained herein, all notices required or permitted hereunder shall be in writing.  Any notice to be given hereunder shall be deemed to be served properly if served in any of the following modes:

(a)         personally, by delivering the notice to the Party on which it is to be served at that Party's address for service.  Personally served notices shall be deemed to be received by the addressee when actually delivered as aforesaid, provided that such delivery shall be during normal business hours on any Business Day.  If a notice is not delivered on a Business Day or is delivered after the addressee's normal business hours, such notice shall be deemed to have been received by such Party at the commencement of the addressee's first Business Day next following the time of the delivery; or

(b)        by facsimile (or by any other like method by which a written message may be sent) directed to the Party on which it is to be served at that Party's address for service. A notice so served shall be deemed to be received by the addressee when actually received by it, if received within normal business hours on any Business Day or at the commencement of the next ensuing Business Day following transmission if such notice is not received during business hours.

13.5     Addresses For Notices

The address for service of notices hereunder of each of the Parties shall be as follows:

To each of the the Vendors:

Brian E. Hiebert
Guy C. Grierson
Ian R. de Bie
Gordon A. Maybee
Erin Hiebert
Raylene Grierson
Kathleen de Bie
Patricia Maybee

c/o Watford Energy Ltd.
1340, 734 – 7^th Avenue S.W.
Calgary AB  T2P 3P8
Fax:  (403) 508-7419

with a copy to:

Blake, Cassels & Graydon LLP
#3500, East Tower, Bankers Hall
855 – 2^nd Street S.W.
Calgary AB  T2P 4J8
Fax:  (403) 260-9700

To the Purchaser:

MarkWest Acquisitions Corp.
c/o MarkWest Resources Canada
155 Inverness Drive West
Suite 200
Englewood, Colorado USA
80112-5000
Fax:  (303) 290-8700
Attention:  Chairman of the Board

with a copy to:

Fraser Milner Casgrain LLP
30^th Floor, Fifth Avenue Place
237 – 4^th Avenue S.W.
Calgary AB  T2P 4X7
Fax:  (403) 268-3100

A Party may change its address for service by notice to the other Party, and such changed address for service thereafter shall be effective for all purposes of this Agreement.

13.6     Tax Election

The Purchaser may, at its option, make an election under Section 338(g) of the U.S. Internal Revenue Code of 1986, as amended, with respect to the purchase.  If the Purchaser makes such election, it shall provide the Vendors any notice required under such Code and the regulations promulgated thereunder.

13.7     Costs and Expenses

Except as specifically provided herein, all legal and other costs and expenses in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party which incurred the same.  For greater certainty the Vendors shall be responsible for all costs, fees and disbursements chargeable by the Vendor's Counsel, RJBC Inc. and Waterous Securities Inc. relating directly to the transactions contemplated by or consummated as a result of this Agreement excluding (for clarification) any engineering reports prepared prior to the Closing Date.

13.8     Further Assurances

At the Closing Date and thereafter as may be necessary, the Parties shall execute, acknowledge and deliver such instruments and take such other actions as may be reasonably necessary to fulfil their respective obligations under this Agreement.

13.9     Governing Law; Attornment; Etc.

(a)         This Agreement and all such documents executed in connection with this agreement and the transactions contemplated hereby shall be governed by, and construed and enforced in accordance with the applicable laws, other than conflict of laws rules, prevailing in the Province of Alberta.

(b)        The Parties irrevocably

(i)          submit and attorn to the non–exclusive jurisdiction of the Courts of the Province of Alberta for all matters arising out of or relating to this Agreement, or any of the transactions contemplated hereby except that the Parties irrevocably submit and attorn to the non-exclusive jurisdiction of the Courts of the Province of Alberta for such matters arising out of or relating to documentation specifically made to be governed by the terms of the applicable laws of the Province of Alberta pursuant to Section 13.9(a);

(ii)         waive all right to object to jurisdiction of such Courts in any legal action or proceeding relative to this Agreement or the transactions contemplated hereby or execution of any judgment, order or decree issued in or as a result of any such action, suit or proceeding which they may now or hereafter have by reason of domicile or otherwise;

(iii)        waive any objection to the laying of venue in such Courts of any of the aforesaid actions, suits or proceedings arising out of or in connection with this Agreement or the transactions contemplated hereby;

(iv)       waive and agree not to plead or claim that any action, suit or proceeding in such Courts has been brought in an inconvenient forum; and

(v)        waive any right they may have to, or to apply for, trial by jury in connection with any matter, action, proceeding, claim or counterclaim arising out of or relating to this Agreement or any of the transactions contemplated hereby.

13.10   Invalidity of Provisions

If any of the provisions of this Agreement are determined to be invalid, illegal or unenforceable in any respect, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

13.11   Time

Time shall be of the essence in this Agreement.

13.12   Supersedes Earlier Agreements

This Agreement along with the Confidentiality Agreements, the Employment Agreements and the Participation Agreements constitute the entire agreement between the Parties relating to the subject–matter hereof; and there are no collateral or other statements, understandings, covenants, agreements, representations or warranties, written or oral, relating to the subject–matter hereof.  This Agreement supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, between the Parties or their predecessors relating to the subject–matter of this Agreement provided that the Confidentiality Agreement shall remain in full force and effect in accordance with its terms.

13.13   Enurement

This Agreement shall be binding upon and enure to the benefit of the Parties and their respective successors and permitted assigns.

13.14   Counterpart Execution

This Agreement and any document or instrument to be executed and delivered by the Parties hereunder or in connection herewith may be executed and delivered in separate counterparts and delivered by one Party to the other by facsimile, each of which when so executed and delivered shall be deemed an original and all such executed counterparts shall together constitute one and the same agreement.  If this Agreement or any such document or instrument is delivered by facsimile, the Party so delivering this Agreement or such document or instrument shall within a reasonable time after such delivery deliver an original executed copy to the other.

IN WITNESS WHEREOF the Parties have duly executed this Agreement.

Witness	IAN R. DE BIE
Witness	KATHLEEN DE BIE
Witness	BRIAN E. HIEBERT
Witness	ERIN HIEBERT
Witness	GUY C. GRIERSON
Witness	RAYLENE GRIERSON
Witness	GORDON A. MAYBEE
Witness	PATRICIA MAYBEE
	MARKWEST ACQUISITIONS CORP.
	Per:	c/s
	Per:

EX-10.1

EXHIBIT 10.1

U.S. $130,000,000

THIRD AMENDED AND RESTATED CREDIT AGREEMENT,

dated as of August 10, 2001

among

MARKWEST HYDROCARBON, INC.,
as the Borrower,

and

CERTAIN FINANCIAL INSTITUTIONS,
as the Lenders,

and

BANK OF AMERICA, N.A.
as the Administrative Agent for the Lenders

BANC OF AMERICA SECURITIES LLC,
as Lead Arranger and Sole Book Manager

TABLE OF CONTENTS

ARTICLE I			DEFINITIONS AND ACCOUNTING TERMS
	SECTION 1.1			Defined Terms
	SECTION 1.2			Use of Defined Terms
	SECTION 1.3			Cross-References
	SECTION 1.4			Accounting and Financial Determinations
ARTICLE II			COMMITMENTS, BORROWING PROCEDURES AND NOTES
	SECTION 2.1			Commitments
	SECTION 2.1.1			Revolving Loan Commitment
	SECTION 2.1.2			Commitment to Issue Letters of Credit
	SECTION 2.1.3			Reducing Loan Commitment
	SECTION 2.1.4			Term Loan Commitment
	SECTION 2.1.5			Lenders Not Required To Make Loans or Issue or Participate in Letters of Credit
	SECTION 2.1.6			Increase in Facility A Revolving Loan Commitment Amount
	SECTION 2.2			Reduction of Commitment Amounts
	SECTION 2.2.1			Optional
	SECTION 2.2.2			Mandatory as to Reducing Loans
	SECTION 2.3			Borrowing Procedure
	SECTION 2.4			Continuation and Conversion Elections
	SECTION 2.5			Funding
	SECTION 2.6			Notes
	SECTION 2.7			Letters of Credit
	SECTION 2.7.1			Issuance Requests
	SECTION 2.7.2			Issuances and Extensions
	SECTION 2.7.3			[Intentionally Omitted]
	SECTION 2.7.4			Other Lenders’ Participation
	SECTION 2.7.5			Disbursements
	SECTION 2.7.6			Reimbursement
	SECTION 2.7.7			Deemed Disbursements
	SECTION 2.7.8			Nature of Reimbursement Obligations
	SECTION 2.7.9			Increased Costs; Indemnity
ARTICLE III		REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
	SECTION 3.1			Repayments and Prepayments
	SECTION 3.1.1			Optional Prepayment
	SECTION 3.1.2			Mandatory Prepayment on Reducing Loans
	SECTION 3.1.3			Mandatory Prepayment on Acceleration
	SECTION 3.1.4			Prepayments of Term Loans
	SECTION 3.2			Interest Provisions
	SECTION 3.2.1			Rates
	SECTION 3.2.2			Default Rate
	SECTION 3.2.3			Payment Dates
	SECTION 3.3			Fees
	SECTION 3.3.1			Commitment Fee
	SECTION 3.3.2			Administrative Agent’s Fee
	SECTION 3.3.3			Letter of Credit Fees
ARTICLE IV				CERTAIN LIBO RATE AND OTHER PROVISIONS
	SECTION 4.1			Fixed Rate Lending Unlawful
	SECTION 4.2			Deposits Unavailable
	SECTION 4.3			Increased LIBO Rate Loan Costs, etc
	SECTION 4.4			Funding Losses
	SECTION 4.5			Increased Capital Costs
	SECTION 4.6			Taxes
	SECTION 4.7			Payments, Computations, etc
	SECTION 4.8			Sharing of Payments
	SECTION 4.9			Setoff
ARTICLE V		CONDITIONS TO BORROWING
	SECTION 5.1			Continuation of Existing Loans; Initial Borrowing
	SECTION 5.1.1			Resolutions, etc
	SECTION 5.1.2			Delivery of this Agreement, Prior Lender Assignment
	SECTION 5.1.3			Guaranty Agreements
	SECTION 5.1.4			Collateral Documents
	SECTION 5.1.5			Certificate (Acquisition)
	SECTION 5.1.6			Closing Certificate
	SECTION 5.1.7			Opinions of Counsel
	SECTION 5.1.8			Closing Fees, Expenses, etc
	SECTION 5.1.9			Evidence of Insurance
	SECTION 5.1.10			Projections
	SECTION 5.1.11			Title
	SECTION 5.1.12			Initial Reserve Report
	SECTION 5.1.13			Environmental Reports
	SECTION 5.1.14			Financial Statements
	SECTION 5.1.15			Incentive Payments Agreement
	SECTION 5.1.16			Other
	SECTION 5.2			Conditions Precedent to Initial Reducing Loan
	SECTION 5.2.1			Revolving Loans Paid
	SECTION 5.2.2			Confirmatory Certificate
	SECTION 5.3			All Borrowings
	SECTION 5.3.1			Compliance with Warranties, No Default, etc
	SECTION 5.3.2			Borrowing Request; Compliance Certificate
	SECTION 5.3.3			Satisfactory Legal Form
ARTICLE VI		REPRESENTATIONS AND WARRANTIES
	SECTION 6.1			Organization, etc
	SECTION 6.2			Due Authorization, Non-Contravention, etc
	SECTION 6.3			Government Approval, Regulation, etc
	SECTION 6.4			Validity, etc
	SECTION 6.5			Financial Information
	SECTION 6.6			No Material Adverse Change
	SECTION 6.7			Litigation, Labor Controversies, etc
	SECTION 6.8			Subsidiaries
	SECTION 6.9			Ownership of Properties
	SECTION 6.10			Taxes
	SECTION 6.11			Pension and Welfare Plans
	SECTION 6.12			Compliance with Law
	SECTION 6.13			Claims and Liabilities
	SECTION 6.14			No Prohibition on Perfection of Collateral Documents
	SECTION 6.15			Solvency
	SECTION 6.16			Environmental Warranties
	SECTION 6.17			Regulations T, U and X
	SECTION 6.18			Accuracy of Information
	SECTION 6.19			Default
	SECTION 6.20			Acquisition Contracts
	SECTION 6.21			Boldman Plant; Other Plants
	SECTION 6.22			Oil and Gas Reserves
	SECTION 6.23			Initial Reserve Report
ARTICLE VII		COVENANTS
	SECTION 7.1			Affirmative Covenants
	SECTION 7.1.1			Financial Information, Reports, Notices, etc
	SECTION 7.1.2			Compliance with Laws, etc
	SECTION 7.1.3			Maintenance of Properties
	SECTION 7.1.4			Use of Proceeds
	SECTION 7.1.5			Insurance
	SECTION 7.1.6			Books and Records
	SECTION 7.1.7			Environmental Covenant
	SECTION 7.1.8			Further Assurances; Additional Collateral
	SECTION 7.1.9			Compliance with Hedging Policy; Hedging Agreements
	SECTION 7.1.10			Hedging Agreements
	SECTION 7.1.11			Performance of Obligations
	SECTION 7.1.12			Payment of Taxes and Claims
	SECTION 7.1.13			ERISA Information and Compliance
	SECTION 7.1.14			Merger into MarkWest Canada Co.
	SECTION 7.1.15			Certain Collateral Agreements
	SECTION 7.2			Negative Covenants
	SECTION 7.2.1			Business Activities
	SECTION 7.2.2			Indebtedness
	SECTION 7.2.3			Liens
	SECTION 7.2.4			Financial Covenants
	SECTION 7.2.5			Investments
	SECTION 7.2.6			Restricted Payments, etc
	SECTION 7.2.7			Rental Obligations
	SECTION 7.2.8			Consolidation, Merger, etc
	SECTION 7.2.9			Asset Dispositions, etc
	SECTION 7.2.10			Subordinated Debt Documents
	SECTION 7.2.11			Transactions with Affiliates
	SECTION 7.2.12			Negative Pledges, Restrictive Agreements, etc
	SECTION 7.2.13			Amendments to Incentive Payments Agreement
	SECTION 7.2.14			Use of Proceeds
ARTICLE VIII		EVENTS OF DEFAULT
	SECTION 8.1			Listing of Events of Default
	SECTION 8.1.1			Non-Payment of Obligations
	SECTION 8.1.2			Breach of Warranty
	SECTION 8.1.3			Non-Performance of Certain Covenants and Obligations
	SECTION 8.1.4			Non-Performance of Other Covenants and Obligations
	SECTION 8.1.5			Default under Subordinated Note Documents or on Other Indebtedness
	SECTION 8.1.6			Judgments
	SECTION 8.1.7			Pension Plans
	SECTION 8.1.8			Control of the Borrower
	SECTION 8.1.9			Bankruptcy, Insolvency, etc
	SECTION 8.1.10			Impairment of Security, etc
	SECTION 8.1.11			Default Under Material Agreement
	SECTION 8.1.12			Invalidity of Loan Documents
	SECTION 8.2			Action if Bankruptcy
	SECTION 8.3			Action if Other Event of Default
ARTICLE IX		THE AGENT
	SECTION 9.1			Actions
	SECTION 9.2			Funding Reliance, etc
	SECTION 9.3			Exculpation
	SECTION 9.4			Successor
	SECTION 9.5			Loans by BofA
	SECTION 9.6			Credit Decisions
	SECTION 9.7			Copies, etc
	SECTION 9.8			Default; Collateral
	SECTION 9.9			Lender Hedging Agreements
ARTICLE X		MISCELLANEOUS PROVISIONS
	SECTION 10.1			Waivers, Amendments, Release of Collateral, etc
	SECTION 10.2			Notices
	SECTION 10.3			Payment of Costs and Expenses
	SECTION 10.4			Indemnification
	SECTION 10.5			Survival
	SECTION 10.6			Severability
	SECTION 10.7			Headings
	SECTION 10.8			Execution in Counterparts
	SECTION 10.9			Governing Law; Entire Agreement
	SECTION 10.10			Successors and Assigns
	SECTION 10.11			Sale and Transfer of Loans and Notes; Participations in Loans and Notes
	SECTION 10.11.1			Assignments
	SECTION 10.11.2			Participations
	SECTION 10.12			Other Transactions
	SECTION 10.13			Forum Selection and Consent to Jurisdiction
	SECTION 10.14			Waiver of Jury Trial
	SECTION 10.15			Confidentiality
	SECTION 10.16			Releases
	SECTION 10.17			Priority of Hedging Obligations
	SECTION 10.18			Certain Remedies
	SECTION 10.19			Maximum Rate
	SECTION 10.20			Entire Agreement

SCHEDULES:
Schedule I	-		Disclosure Schedule
Schedule II	-		Collateral Documents to Be Delivered
Schedule III	-		Description of Initial Reserve Reports
EXHIBITS:
Exhibit A-1		-	Form of Facility A Revolving Note
Exhibit A-2		-	Form of Facility B Revolving Note
Exhibit A-3		-	Form of Term Loan Note
Exhibit B		-	Form of Borrowing Request
Exhibit C		-	Form of Continuation/Conversion Notice
Exhibit D		-	Form of Lender Assignment Agreement
Exhibit E-1		-	Form of Legal Opinion of Davis, Graham & Stubbs
Exhibit E-2		-	Form of Legal Opinion of Baker & Botts
Exhibit E-3		-	Form of Legal Opinion of Fraser Milner Casgrain
Exhibit E-4		-	Form of Legal Opinion of Barry Spector
Exhibit F		-	Form of Compliance Certificate
Exhibit G		-	Form of Amended and Restated Guaranty
Exhibit H		-	Form of Issuance Request
Exhibit I		-	Hedging Policy

THIRD AMENDED AND RESTATED CREDIT AGREEMENT

             THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 10, 2001, among MARKWEST HYDROCARBON, INC., a Delaware corporation (the “Borrower”), the various financial institutions as are or may become parties hereto (collectively, the “Lenders”), and BANK OF AMERICA, N.A. (“BofA”), as administrative agent for the Lenders (in such capacity, the “Agent” or the “Administrative Agent”).

W I T N E S S E T H:

             WHEREAS, the Borrower is engaged in the business of the acquisition, ownership, operation, leasing, and construction of natural gas processing and treating plants, fractionation facilities and pipelines and oil and gas exploration, production and development, natural gas, natural gas liquids and crude oil marketing, storage, transportation and terminalling, and activities related or ancillary to the foregoing;

             WHEREAS, the Borrower, certain financial institutions (the “Norwest Lenders”), and Norwest Bank Colorado, National Association (“Norwest”), as predecessor to BofA in its capacity as Administrative Agent, heretofore entered into an Amended and Restated Working Capital Loan Agreement dated as of October 8, 1996 (such agreement, as so amended, the “Working Capital Loan Agreement”) pursuant to which the Norwest Lenders agreed to make loans (therein referred to as the “Original Working Capital Loans”) to the Borrower;

             WHEREAS, the Borrower, the Norwest Lenders, and Norwest heretofore entered into an Amended and Restated Loan Agreement dated as of October 8, 1996 (such agreement, as so amended, the “Loan Agreement”) pursuant to which the Norwest Lenders agreed to make loans (therein referred to as the “Original Loans”) to the Borrower;

             WHEREAS, the Borrower, certain financial institutions (the “BMO Lenders”), NationsBank, N.A., as syndication agent, and Bank of Montreal (“BMO”), as predecessor to BofA in its capacity as Administrative Agent, heretofore entered into that certain Amended and Restated Credit Agreement dated as of June 20, 1997, as amended (such agreement, as so amended, the “A&R Credit Agreement”) pursuant to which the Borrower, the BMO Lenders, the syndication agent and the Administrative Agent restructured the indebtedness of the Borrower to the Original Lenders pursuant to the Original Loan Agreement and the Original Working Capital Loan Agreement and amended, renewed, restated and converted such indebtedness to indebtedness under the A&R Credit Agreement (the “BMO Loans”);

             WHEREAS, the Borrower, certain financial institutions (the “Existing Lenders”), and the Administrative Agent heretofore entered into that certain Second Amended and Restated Credit Agreement dated as of September 29, 1999 (the “Existing Credit Agreement”), as amended from time to time pursuant to which the Existing Lenders amended, renewed, restated and restructured the indebtedness under the A&R Credit Agreement as set forth in the Existing Credit Agreement and agreed to make loans (the “Existing Loans”) to the Borrower;

             WHEREAS, pursuant to assignment agreements (collectively, the “Prior Lender Assignment”) of even date herewith, but effective for all purposes immediately prior hereto, Bank of America will purchase, from the lenders (other than Bank of America) under the Existing Credit Agreement, all of such lenders’ loans under the Existing Credit Agreement;

             WHEREAS, the Borrower, the Lenders, and the Administrative Agent agree immediately after giving effect to the Prior Lender Assignment to amend and restate the Existing Credit Agreement as herein provided;

             WHEREAS, the Borrower, the Lenders and the Administrative Agent hereby make further amendments to the Existing Credit Agreement and restate the Existing Credit Agreement in its entirety;

             NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

             SECTION 1.1   Defined Terms.  The following terms (whether or not underscored) when used in this Agreement, including its preamble and recitals, shall, except where the context otherwise requires, have the following meanings (such meanings to be equally applicable to the singular and plural forms thereof) and the meanings set forth in Schedules II and III to this Agreement:

             “A&R Credit Agreement” is defined in the fourth recital.

             “Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of the capital stock, partnership interests, membership interests or equity of any Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination of the Borrower or a Subsidiary with another Person (other than a Person that is a Subsidiary) provided that, if the Borrower is a party to such merger, consolidation or other combination, the Borrower shall be the surviving entity, and if the Borrower is not a party to such transaction, the Subsidiary shall be the surviving entity.

             “Acquisition Contracts” means (a) the Share Purchase Agreement dated August 10, 2001 among the Borrower, MarkWest Canada Co., and the Sellers therein named with respect to the shares of the Watford Entities and Watford Energy as therein defined, and (b) the Share Purchase Agreement between the Borrower and Kaiser Energy Ltd.

             “Administrative Agent” is defined in the preamble and includes each other Person as shall have subsequently been appointed as the successor Administrative Agent pursuant to Section 9.4.

             “Affiliate” of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Plan).  A Person shall be deemed to be “controlled by” any other Person if such other Person possesses, directly or indirectly, power (a) to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners; or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise.

             “Agreement” means, on any date, this Third Amended and Restated Credit Agreement as originally in effect on the Effective Date and as thereafter from time to time amended, supplemented, amended and restated, or otherwise modified and in effect on such date.

             “Alternate Base Rate” means, on any date and with respect to all Base Rate Loans, a fluctuating rate of interest per annum equal to the higher of (a) the rate of interest most recently established by BofA as its base rate, and (b) the Federal Funds Rate most recently determined by the Administrative Agent (in accordance with the definition of Federal Funds Rate) plus 0.5%.  The Alternate Base Rate is not necessarily intended to be the lowest rate of interest determined by the BofA in connection with extensions of credit.  Changes in the rate of interest on that portion of any Loans maintained as Base Rate Loans will take effect simultaneously with each change in the Alternate Base Rate.

             “Applicable Margin” means, with respect to any Loan of any type or any Letter of Credit, and at such time as the Leverage Ratio is in one of the following ranges, the number of basis points (“b.p.”) per annum for the relevant type of Loan, Commitment Fee or Letter of Credit and the relevant range set forth below:

	Leverage Ratio	Applicable Margin
Pricing Level		LIBO Rate Loan	Letter of Credit	Base Rate Loan	Commitment Fee
1	Less than or equal to 1.0X	150.0 b.p.	150.0 b.p.	37.5 b.p.	25.0 b.p.
2	Greater than 1.0X but less than or equal to 2.0X	175.0 b.p.	175.0 b.p.	62.5 b.p.	30.0 b.p.
3	Greater than 2.0X, but less than or equal to 2.75X	200.0 b.p.	200.0 b.p.	87.5 b.p.	37.5 b.p.
4	Greater than 2.75X, but less than or equal to 3.25X	225.0 b.p.	225.0 b.p.	112.5 b.p.	50.0 b.p.
5	Greater than 3.25X	250.0 b.p.	250.0 b.p.	137.5 b.p.	50.0 b.p.

The Leverage Ratio shall be determined from the then most recent monthly financial statements delivered by the Borrower pursuant to Section 7.1.1 and any changes in Applicable Margin shall become effective the first day of the second month following the date such financial statements are dated.  In the event that the Borrower shall at any time fail to furnish the Lenders such financial statements required to be delivered under Section 7.1.1, the maximum Applicable Margin as set forth above shall apply until such time as such financial statements are so delivered.  Changes in the Applicable Margin as a result of a change in the Leverage Ratio will occur automatically as aforesaid without notice.  The Applicable Margin shall be set at Pricing Level 4 for the period beginning on the Effective Date and ending on January 31, 2002, unless during such period the Leverage Ratio falls within Pricing Level 5, in which case Pricing Level 5 will apply.

             “Assignee Lender” is defined in Section 10.11.1.

             “Authorized Officer” means, relative to any Obligor, those of its officers whose signatures and incumbency shall have been certified to the Administrative Agent and the Lenders pursuant to Section 5.1.1.

             “Base Rate Loan” means a Loan bearing interest at a fluctuating rate determined by reference to the Alternate Base Rate.

             “Base Rate Margin” means, on any date, a per annum fee equal to the Applicable Margin for Base Rate Loans on such date.

             “Basin” means Basin Pipeline L.L.C., a Michigan limited liability company.

             “BMO” is defined in the fourth recital.

             “BofA” is defined in the preamble.

             “Borrower” is defined in the preamble.

             “Borrowing” means the Loans of the same type and, in the case of LIBO Rate Loans, having the same Interest Period made by all Lenders on the same Business Day and pursuant to the same Borrowing Request in accordance with Section 2.1.

             “Borrowing Request” means a loan request and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit B hereto.

             “Business Day” means (a) any day which is neither a Saturday or Sunday nor a legal holiday on which banks are authorized or required to be closed in Dallas, Texas, Denver, Colorado or New York, New York; and (b) relative to the making, continuing, prepaying or repaying of any LIBO Rate Loans, any day on which dealings in Dollars are carried on in the interbank eurodollar market.

             “Canadian Acquisition” means the acquisition by MarkWest Canada Co. of the Target Companies pursuant to the Acquisition Contracts.

             “Canadian Facility” means a credit facility providing for loans to MarkWest Canada Co. in an initial principal amount of up to $35,000,000, entered into after the date hereof to refinance Loans under Revolving Facility B, which is secured by the Collateral and by assets owned by the Borrower’s Canadian Subsidiaries, is guaranteed by the Borrower and its Subsidiaries, and in which each Lender (or its Affiliate) is also a lender thereunder and has the same pro rata share thereunder as such Lender (or its Affiliate) has hereunder; provided, however, that the execution of this Agreement shall not constitute a commitment by any Lender to be a lender in the Canadian Facility.

             “Canadian Ratio” means, at any time, an amount equal to the aggregate commitment of the lenders under the Canadian Credit Facility (the “Canadian Commitment”) divided by an amount equal to the sum of the aggregate Commitment Amount in effect hereunder at such time plus the Canadian Commitment in effect at such time.

             “Capitalized Lease Liabilities” means all monetary obligations of the Borrower or any of its Subsidiaries under any leasing or similar arrangement which, in accordance with GAAP, would be classified as capitalized leases, and, for purposes of this Agreement and each other Loan Document, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP, and the stated maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty.

             “Cash Collateralize” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the Issuer and the Lenders, as collateral for the Obligations in respect of Letters of Credit, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the Administrative Agent and the Issuer (which documents are hereby consented to by the Lenders).  Derivatives of such term shall have corresponding meaning.  The Borrower hereby grants the Administrative Agent, for the benefit of the Issuer and the Lenders, a Lien on all such cash and deposit account balances.  Cash collateral shall be maintained in blocked, non–interest bearing deposit accounts at BofA or other institutions satisfactory to it.

             “Cash Equivalent Investment” means, at any time: (a) any evidence of Indebtedness, maturing not more than one year after such time, issued or guaranteed by the United States Government; (b) commercial paper, maturing not more than nine months from the date of issue, which is issued by (i) a corporation (other than an Affiliate of any Obligor) organized under the laws of any state of the United States or of the District of Columbia and rated A–l by Standard & Poor’s Corporation or P–l by Moody’s Investors Service, Inc., or (ii) any Lender (or its holding company); (c) any certificate of deposit or bankers acceptance, maturing not more than one year after such time, which is issued by either (i) a commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $250,000,000, or (ii) any Lender or an Affiliate thereof; (d) any repurchase agreement entered into with any Lender or an Affiliate thereof (or other commercial banking institution of the stature referred to in clause (c)(i)) which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c); and (ii) has a market value at the time such repurchase agreement is entered into of not less than 100% of the repurchase obligation of such Lender or Affiliate (or other commercial banking institution) thereunder, (e) obligations of any state within the United States of America, any nonprofit corporation or any instrumentality of the foregoing, provided that at the time of their purchase, such obligations are rated in one of the two highest letter rating categories (e.g. in the case of Standard & Poor’s Corporation, either its AAA or AA category) by a nationally recognized securities credit rating agency, (f) obligations issued by political subdivisions or municipalities of any state within the United States of America, any nonprofit corporation or any instrumentality of the foregoing, provided that at the time of their purchase, such obligations are rated in one of the two highest letter rating categories (e.g., in the case of Standard & Poor’s Corporation, either its AAA or AA category) by a nationally recognized securities credit rating agency, or (g) eurodollar deposits with the overseas branch of (i) any commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $250,000,000, or (ii) any Lender or an Affiliate thereof.

             “CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended.

             “CERCLIS” means the Comprehensive Environmental Response Compensation Liability Information System List.

             “Change in Control” means (a) the acquisition by any Person, or two or more Persons acting in concert (other than John Fox and members of his family), of beneficial ownership (within the meaning of Rule 13d–3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 30% or more of the outstanding shares of voting stock of the Borrower; or (b) the failure of John Fox and members of his family to own, free and clear of all Liens or other encumbrances, at least 25% of the outstanding shares of voting stock of the Borrower on a fully diluted basis.

             “Closing Date Security Documents” shall have the meaning set forth in Schedule II.

             “Code” means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time.

             “Collateral” means all of the items and types of property described in now existing or hereafter created Collateral Documents and cash and non–cash proceeds thereof.

             “Collateral Documents” means each Guaranty, each pledge agreement, security agreement, mortgage, assignment and other document described on Schedule II hereto, and all other security agreements, deeds of trust, mortgages, chattel mortgages, assignments, pledges, guaranties, financing statements, continuation statements, extension agreements and other agreements or instruments previously delivered or now or hereafter delivered by Borrower or any Subsidiary of the Borrower to the Administrative Agent on behalf of the Lenders or to the Lenders in connection with this Agreement or any transaction contemplated hereby to secure or guarantee the payment of any part of the Obligations or the performance of any other duties and obligations of Borrower under the Loan Documents, whenever made or delivered.

             “Commitment” means the sum of (a) as the context may require, a Lender’s Reducing Loan Commitment or Revolving Loan Commitment, and (b) such Lender’s Term Loan Commitment.

             “Commitment Amount” means the sum of (a) as the context may require, either the Reducing Loan Commitment Amount or the Revolving Loan Commitment Amount, and (b) the Term Loan Commitment Amount.

             “Commitment Fee” means, on any date, a per annum fee equal to the commitment fee indicated in the pricing grid set forth in the definition of Applicable Margin on such date.

             “Commitment Termination Date” means, with respect to the Reducing Loans and the Revolving Loans, as the context may require, either the Reducing Loan Commitment Termination Date or the Revolving Loan Commitment Termination Date, and with respect to the Term Loans, the date of the Borrowing of the Term Loans.

             “Commitment Termination Event” means (a) the occurrence of any Default described in clauses (a) through (d) of Section 8.1.9; or (b) the occurrence and continuance of any other Event of Default and either (i) the declaration of the Loans and other Obligations to be due and payable pursuant to Section 8.3, or (ii) in the absence of such declaration, the giving of notice by the Administrative Agent, acting at the direction of the Required Lenders, to the Borrower that the Commitments have been terminated.

             “Consolidated Net Income” of the Borrower means, for any period, the aggregate net income (or net loss, as the case may be) of the Borrower and its Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom, without duplication, (i) items classified as extraordinary (other than the tax benefit of the utilization of net operating loss carry-forwards and alternative minimum tax credits); (ii) any gain or loss, net of taxes, on the sale or other disposition of assets (including the capital stock or other equity ownership of any other person, but excluding the sale of oil and gas inventories in the ordinary course of business); (iii) any gain or loss, net of taxes, realized on the termination of any employee pension benefit plan; (iv) any adjustments of a deferred tax liability or asset pursuant to Statement of Financial Accounting Standards No. 109 which result from changes in enacted tax laws or rates; (v) the cumulative effect of a change in accounting principles; and (vi) impairment losses on oil and gas properties.

             “Contingent Liability” means any agreement, undertaking or arrangement by which any Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, obligation or any other liability of any other Person (other than by endorsements of instruments in the course of collection), or guarantees the payment of dividends or other distributions upon the shares of any other Person; provided, however, that notwithstanding the foregoing, the definition of “Contingent Liability” shall not include (a) any contingent payments owing by Borrower or any or its Subsidiaries in connection with Section 2 of the West Shore/Basin Purchase Agreement, or (b) Incentive Payments paid in accordance with the Incentive Payments Agreement.  The amount of any Person’s obligation under any Contingent Liability shall (subject to any limitation set forth therein) be deemed to be the outstanding principal amount (or maximum principal amount, if larger) of the debt, obligation or other liability guaranteed thereby.

             “Continuation/Conversion Notice” means a notice of continuation or conversion and certificate duly executed by an Authorized Officer of the Borrower, substantially in the form of Exhibit C hereto.

             “Controlled Group” means all members of a controlled group of corporations and all members of a controlled group of trades or businesses (whether or not incorporated) under common control which, together with the Borrower, are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA.

             “Conversion Date” means the date the initial Reducing Loan is made pursuant to the terms hereof which shall be January 1, 2004 if a Commitment Termination Event has not previously occurred.

             “Current Ratio” means the ratio of (a) consolidated current assets of the Borrower and its Subsidiaries (including (i) any unused portion of the Facility A Revolving Loan Commitment Amount and (ii) before the Stated Maturity Date for Revolving Facility B, any unused portion of the Facility B Revolving Loan Commitment Amount, and after the Stated Maturity Date for Revolving Facility B, any unused portion of the commitment under the Canadian Facility) to (b) consolidated current liabilities of the Borrower and its Subsidiaries, both as determined in accordance with GAAP (it being understood that only the funded portion, if any, of any reduction pursuant to Section 2.2.2 of the Reducing Loan Commitment Amount will be deemed to be a current liability for purposes of this definition); provided that for purposes of this definition, non-cash mark-to-market adjustments relating to Hedging Agreements required to be made under GAAP shall be excluded for purposes of determining such ratio.

             “Default” means any Event of Default or any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default.

             “Default Rate” means the rate of interest set forth in Section 3.2.2.

             “Disclosure Schedule” means the Disclosure Schedule attached hereto as Schedule I, as it may be amended, supplemented or otherwise modified from time to time by the Borrower with the written consent of the Administrative Agent and the Required Lenders.

             “Dollar” and the sign “$” mean lawful money of the United States.

             “Domestic Office” means, relative to any Lender, the office of such Lender designated as such below its signature hereto or designated in the Lender Assignment Agreement or such other office of a Lender (or any successor or assign of such Lender) within the United States as may be designated from time to time by notice from such Lender, as the case may be, to each other Person party hereto.

             “Domestic Subsidiary” means a Subsidiary of the Borrower that is incorporated, organized or formed under the laws of a state in the United States.

             “EBITDA” means net earnings (excluding extraordinary items, gains and losses on sales and retirement of assets, non-cash write downs and charges resulting from accounting convention changes) before deduction for federal and state income taxes, Interest Expense, depreciation, depletion and amortization expense and other non-cash charges and expenses, including, without limitation, non-cash charges and expenses relating to Hedging Agreements, of the Borrower and its Subsidiaries on a consolidated basis, all determined in accordance with GAAP.

             “Effective Date” means the first date all conditions precedent in Section 5.1 are satisfied or waived in accordance with Section 10.1.

             “Environmental Laws” means all applicable federal, state or local statutes, laws, ordinances, codes, rules, regulations and guidelines (including consent decrees and administrative orders) relating to public health and safety and protection of the environment.

             “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time.  References to sections of ERISA also refer to any successor sections.

             “ERISA Affiliate” shall mean each trade or business (whether or not incorporated) which together with the Company or any Subsidiary would be deemed to be a “single employer” within the meaning of section 4001(b)(1) of ERISA or subsections (b), (c), (m) or (o) of section 414 of the Code.

             “ERISA Event” shall mean (i) a “Reportable Event” described in Section 4043 of ERISA and the regulations issued thereunder, (ii) the withdrawal of the Borrower, any Subsidiary or any ERISA Affiliate from a Plan during a plan year in which it was a “substantial employer” as defined in Section 4001(a)(2) of ERISA, (iii) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA, (iv) the institution of proceedings to terminate a Plan by the PBGC or (v) any other event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan.

             “Event of Default” is defined in Section 8.1.

             “Existing Credit Agreement” is defined in the fifth recital.

             “Existing Loans” is defined in the fifth recital.

             “Facility A Revolving Loan Commitment Amount” means, on any date, $55,000,000, as such amount may be increased pursuant to Section 2.1.6 and as may be reduced from time to time pursuant to Section 2.2.

             “Facility B Revolving Loan Commitment Amount” means, on any date, $35,000,000, as such amount may be reduced from time to time pursuant to Section 2.2.

             “Facility A Revolving Note” means the promissory note issued to each Lender under this Agreement to evidence the Borrower’s obligations to repay the Revolving Loans made under Revolving Facility A and to repay the Reducing Loans, each such note to be substantially in the form of Exhibit A-1.

             “Facility B Revolving Note” means the promissory note issued to each Lender under this Agreement to evidence the Borrower’s obligations to repay the Loans outstanding under Revolving Facility B, substantially in the form of Exhibit A-2.

             “Federal Funds Rate” means, for any day, a fluctuating interest rate per annum (rounded upwards to the nearest 1/100 of 1%) equal to (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day as so published on the next succeeding Business Day) by the Federal Reserve Bank of New York; or (b) if such rate is not so published on the next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to BofA on such day on such transactions as determined by the Administrative Agent.

             “Fiscal Quarter” means any quarter of a Fiscal Year.

             “Fiscal Year” means any period of twelve consecutive calendar months ending on December 31; references to a Fiscal Year with a number corresponding to any calendar year (e.g., the “2000 Fiscal Year”) refer to the Fiscal Year ending on December 31 during such calendar year.

             “Fixed Charges” for any period ending on a calculation date means the sum of (a) Interest Expense for such period, plus (b) maintenance capital expenses of Borrower and its Subsidiaries for such period, plus (c) dividends paid, declared or required to be paid in such period in respect of preferred stock, plus (d) 12.5% of the principal amount of Indebtedness (other than Subordinated Debt) of the Borrower and its Subsidiaries of the nature referred to in clauses (a), (b), and (c) of the definition of “Indebtedness” hereunder which is outstanding on such date of calculation.

             “Fixed Charge Coverage Ratio” as of a date means the ratio of (a) EBITDA for the 12 months ended on such date, after adjusting such EBITDA on a pro forma basis for any assets sold (to the extent set forth in the last sentence of this definition) or acquired after the beginning of such 12-month period as if such assets had been sold or acquired at the beginning of such period (provided, however, that the Required Lenders must consent to any pro forma adjustments to actual historical EBITDA for any assets sold or acquired) to (b) Fixed Charges for such 12-month period.  There shall be an adjustment to EBITDA on a pro forma basis for assets sold or transferred if the fair market value of such assets (including the transfer of Hydrocarbon Interests as payments in kind pursuant to the Incentive Payments Agreement as permitted by Section 7.2.9(b)(vi)) at the time of conveyance equals or exceeds $10,000,000 in any calendar year.

             “Foreign Subsidiary” means a Subsidiary of the Borrower organized under the laws of a jurisdiction outside the United States.

             “F.R.S. Board” means the Board of Governors of the Federal Reserve System or any successor thereto.

             “GAAP” is defined in Section 1.4.

             “Guaranty” means any Guaranty or Amended and Restated Guaranty executed and delivered pursuant to Section 5.1.3 or Section 7.1.8, substantially in the form of Exhibit G hereto, as amended, supplemented, restated or otherwise modified from time to time.

             “Hazardous Material” means (a) any “hazardous substance”, as defined by CERCLA; (b) any “hazardous waste”, as defined by the Resource Conservation and Recovery Act, as amended; (c) crude oil or any fraction thereof; or (d) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other applicable federal, state or local law, regulation, ordinance or requirement (including consent decrees and administrative orders) relating to or imposing liability or standards of conduct concerning any hazardous, toxic or dangerous waste, substance or material, all as amended or hereafter amended.

             “Hedging Agreement” for a Person means any interest rate swap agreements, interest rate cap agreements, interest rate collar agreements, commodity price protection agreements, foreign exchange protection agreements, and all other agreements or arrangements designed to protect such Person against fluctuations in interest rates, commodity prices, or foreign exchange rates, as any such agreement is amendment, supplemented or otherwise modified from time to time.

             “Hedging Counterparty” means any Person which is a counterparty to a Hedging Agreement.

             “Hedging Obligation” means, with respect to any Person, all liabilities of such Person under any Hedging Agreement.

             “Hedging Policy” is defined in Section 7.1.9.

             “herein”, “hereof”, “hereto”, “hereunder” and similar terms contained in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular Section, paragraph or provision of this Agreement or such other Loan Document.

             “Hydrocarbon Interests” means leasehold and other interests in or under oil, gas and other liquid or gaseous hydrocarbon leases with respect to Oil and Gas Properties wherever located, mineral fee interests, overriding royalty and royalty interests, net profit interests, production payment interests relating to oil, gas or other liquid or gaseous hydrocarbons wherever located including any reserved or residual interest of whatever nature.

             “Incentive Payments” means payments of the “Entitlement Amount” as defined in and pursuant to the Incentive Payment Agreement.

             “Incentive Payments Agreement” means the Executive Incentive and Employment Agreement dated August 10, 2001 among Ian R. De Bie, Brian E. Hiebert, Guy C. Grierson, Gordon A. Maybee and MarkWest Canada Co. in the form delivered to the Administrative Agent pursuant to Section 5.1.17 and as may be amended as permitted under Article VII.

             “including” means including without limiting the generality of any description preceding such term, and, for purposes of this Agreement and each other Loan Document, the parties hereto agree that a general statement, which is followed by or referable to an enumeration of specific matters, shall not be limited to matters similar to the matters specifically mentioned.

             “Indebtedness” of any Person means, without duplication:  (a) all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments; (b) all obligations, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker’s acceptances issued for the account of such Person; (c) all obligations of such Person as lessee under leases which have been or should be, in accordance with GAAP, recorded as Capitalized Lease Liabilities; (d) all other items which, in accordance with GAAP, would be included as liabilities on the liability side of the balance sheet of such Person as of the date at which Indebtedness is to be determined other than non-cash items, such as deferred taxes, required by GAAP to be included as liabilities on the balance sheet; (e) net liabilities of such Person under all Hedging Obligations except for non-cash mark-to-market adjustments required by GAAP; (f) all obligations of such Person to pay the deferred purchase price of property or services which have been or should be in accordance with GAAP, included as liabilities, and indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements), whether or not such indebtedness shall have been assumed by such Person except to the extent such indebtedness is expressly non-recourse to such Person; and (g) all Contingent Liabilities of such Person in respect of any of the foregoing; provided, however, that for the purposes of this definition, a production payment or similar transaction which is non-recourse to such Person shall not constitute “Indebtedness”.  For all purposes of this Agreement, the Indebtedness of any Person shall include the Indebtedness of any partnership or joint venture in which such Person is a general partner or a joint venturer unless such Indebtedness is expressly non-recourse to such general partner or joint venturer.

             “Indemnified Liabilities” is defined in Section 10.4.

             “Indemnified Parties” is defined in Section 10.4.

             “Independent Engineer” has the meaning set forth in Section 7.1.1(l).

             “Initial Reserve Report” means the reserve report(s) described in Schedule III.

             “Insurance Deposit Account” is defined in Section 7.1.4.

             “Intercompany Loan” means a loan from the Borrower to MarkWest Canada Co., to be evidenced by a promissory note, the proceeds of which are used by MarkWest Canada Co. to pay a portion of the cash portion of the purchase price under the Acquisition Contracts and transaction expenses incurred in connection therewith.

             “Intercreditor Agreement” is defined in Section 7.2.3.

             “Interest Expense” means, for any period, for the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) all interest, premium payments, fees, charges and related expenses of the Borrower and its Subsidiaries in connection with borrowed money (including capitalized interest and including fees payable in respect of letters of credit and bankers’ acceptances) or in connection with the deferred purchase price of assets, in each case to the extent treated as interest in accordance with GAAP, and (b) the portion of rent expense of the Borrower and its Subsidiaries with respect to such period under capital leases that is treated as interest in accordance with GAAP; provided, however that the issuance of PIK Notes shall not be included in the calculation of Interest Expense.

             “Interest Period” means, relative to any LIBO Rate Loans, the period beginning on (and including) the date on which such LIBO Rate Loan is made or continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or 2.4 and shall end on (but exclude) the day which numerically corresponds to such date one, two, three or six months thereafter (or, if such month has no numerically corresponding day, on the last Business Day of such month), in either case as the Borrower may select in its relevant notice pursuant to Section 2.3 or 2.4; provided, however, that (a) the Borrower shall not be permitted to select Interest Periods to be in effect at any one time which have expiration dates occurring on more than eight different dates; (b) Interest Periods commencing on the same date for Loans comprising part of the same Borrowing shall be of the same duration; (c) if such Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall end on the next following Business Day (unless, if such Interest Period applies to LIBO Rate Loans, such next following Business Day is the first Business Day of a calendar month, in which case such Interest Period shall end on the Business Day next preceding such numerically corresponding day); and (d) no Interest Period may end later than the Stated Maturity Date, and the Borrower shall not select Interest Periods for Loans in amounts such that the Borrower would be obligated to prepay Loans on any date other than the last day of an Interest Period as a result of the operation of Section 2.2.2.

             “Investment” means, relative to any Person, (a) any loan or advance made by such Person to any other Person (excluding travel and similar advances not to exceed $200,000 in the aggregate for all such advances to officers and employees made in the ordinary course of business, and relocation advances made to officers and employees in the ordinary course of business); (b) any Contingent Liability of such Person; and (c) any ownership or similar interest held by such Person in any other Person.  The amount of any Investment shall be the original principal or capital amount thereof less all returns of principal or equity thereon (and without adjustment by reason of the financial condition of such other Person) and shall, if made by the transfer or exchange of property other than cash, be deemed to have been made in an original principal or capital amount equal to the fair market value of such property.

             “Issuance Request” means a request and certificate duly executed by the chief executive, accounting or financial Authorized Officer of the Borrower, substantially in the form of Exhibit H attached hereto (with such changes thereto as may be agreed upon from time to time by the Administrative Agent, the Issuer and the Borrower).

             “Issuer” means any affiliate, unit or agency of BofA or any other Lender which has agreed to issue one or more Letters of Credit at the request of the Administrative Agent (which shall, at the Borrower’s request, notify the Borrower from time to time of the identity of such other Lender).

             “Leland” shall have the meaning given to it in the Acquisition Contracts.

             “Lender Assignment Agreement” means a Lender Assignment Agreement, substantially in the form of Exhibit D hereto.

             “Lender Hedging Agreement” means any Hedging Agreements entered into by Borrower or any of its Subsidiaries in which a Lender or an Affiliate of a Lender is the Hedging Counterparty.

             “Lenders” is defined in the preamble.

             “Letter of Credit” is defined in Section 2.7.

             “Letter of Credit Commitment” means, relative to any Lender, such Lender’s obligation to issue (in the case of an Issuer) or participate in (in the case of all Lenders) Letters of Credit pursuant to Section 2.1.2.

             “Letter of Credit Outstandings” means, at any time, an amount equal to the sum of (a) the aggregate Stated Amount at such time of all Letters of Credit then outstanding and undrawn (as such aggregate Stated Amount shall be adjusted, from time to time, as a result of drawings, the issuance of Letters of Credit, or otherwise), plus (b) the then aggregate amount of all unpaid and outstanding Reimbursement Obligations.

             “Letter of Credit Sublimit” means (a) through the Stated Maturity Date for Revolving Facility B, $15,000,000, and (b) from and after the Stated Maturity Date for Revolving Facility B,  $10,000,000.

             “Leverage Ratio” means, as of a date, the ratio of (a) Total Funded Debt to (b) EBITDA for the 12 months most recently ended prior to such date, after adjusting such EBITDA on a pro forma basis for any assets sold (to the extent set forth in the last sentence of this definition) or acquired after the beginning of such most recently ended 12 months as if such assets had been sold or acquired at the beginning of such twelve most recently ended months; provided, however, that the Required Lenders must consent to any pro forma adjustments made to actual historical EBITDA for any asset which Borrower or any of its Subsidiaries has sold or acquired.  There shall be an adjustment to EBITDA on a pro forma basis for assets sold or transferred if the fair market value of such assets at the time of conveyance (including the transfer of Hydrocarbon Interests as payments in kind pursuant to the Incentive Payments Agreement as permitted by Section 7.2.9(b)(vi)) equals or exceeds $10,000,000 in any calendar year.

             “LIBO Rate” means, relative to any Interest Period for LIBO Rate Loans, the rate of interest equal to the average (rounded upwards, if necessary, to the nearest 1/16 of 1%) of the rates per annum at which Dollar deposits in immediately available funds are offered to BofA’s LIBOR Office in the interbank eurodollar market as at or about 11:00 a.m., Central time, two Business Days prior to the beginning of such Interest Period for delivery on the first day of such Interest Period, and in an amount approximately equal to the amount of BofA’s LIBO Rate Loan and for a period approximately equal to such Interest Period.

             “LIBO Rate Loan” means a Loan bearing interest, at all times during an Interest Period applicable to such Loan, at a fixed rate of interest determined by reference to the LIBO Rate (Reserve Adjusted).

             “LIBO Rate (Reserve Adjusted)” means, relative to any Loan to be made, continued or maintained as, or converted into, a LIBO Rate Loan for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined pursuant to the following formula:

LIBO Rate	=		LIBO Rate
(Reserve Adjusted)		1.00 -	LIBOR Reserve Percentage

             The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans will be determined by the Administrative Agent on the basis of the LIBOR Reserve Percentage in effect on, and the applicable LIBO Rates furnished to and received by the Administrative Agent from BofA, two Business Days before the first day of such Interest Period.

             “LIBOR Office” means, relative to any Lender, the office of such Lender designated as such below its signature hereto or designated in the Lender Assignment Agreement or such other office of a Lender as designated from time to time by notice from such Lender to the Borrower and the Administrative Agent, whether or not outside the United States, which shall be making or maintaining LIBO Rate Loans of such Lender hereunder.

             “LIBOR Reserve Percentage” means, relative to any Interest Period for LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to the maximum aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to assets or liabilities consisting of and including “Eurocurrency Liabilities”, as currently defined in Regulation D of the F.R.S. Board, having a term approximately equal or comparable to such Interest Period.

             “Lien” means any security interest, mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge against or interest in property to secure payment of a debt or performance of an obligation or other priority or preferential arrangement of any kind or nature whatsoever.

             “Loan” means, as the context may require, a Reducing Loan,  a Revolving Loan or a Term Loan of any type.

             “Loan Agreement” is defined in the third recital.

             “Loan Documents” means this Agreement, the Notes, each of the Collateral Documents, each Guaranty, the Subordination Agreement, any Intercreditor Agreement, and each other agreement, document or instrument delivered by the Borrower or any of its Subsidiaries from time to time in connection with this Agreement and the Notes.  In addition, references to “Loan Documents” in the Collateral Documents shall include Lender Hedging Agreements.

             “Margin Stock” means margin stock as defined in Regulation U.

             “MarkWest 401(k) Plan” means the MarkWest Hydrocarbon, Inc. 401(k) Savings & Profit Sharing Plan dated April 1, 1988, restated January 1, 1997 and amended November 1, 1998, the purpose of which is to enable eligible employees to save for retirement and to provide certain benefits in the event of death, disability, or other termination of employment.  The MarkWest 401(k) Plan is for the exclusive benefit of eligible employees of the Borrower and their beneficiaries.

             “MarkWest Michigan” means MarkWest Michigan, Inc., a Colorado corporation.

             “MarkWest Canada Co.” means MarkWest Acquisitions Corp., a corporation organized pursuant to the laws of the province of Alberta, Canada, a wholly owned Subsidiary of Borrower.

             “MarkWest Resources” means MarkWest Resources, Inc., a Colorado corporation.

             “Material Adverse Effect” means with respect to any matter that such matter could reasonably be expected materially and adversely to affect the assets, business, properties, financial condition or prospects, or results or operations of the Borrower and its Subsidiaries taken as a whole, or the ability of the Borrower or any Subsidiary to perform its respective obligations under any of the Loan Documents.

“Matrex” means Matrex, L.L.C., a Michigan limited liability company.

             “Monthly Payment Date” means the last day of each calendar month or, if any such day is not a Business Day, the next succeeding Business Day.

             “Note” means a promissory note of the Borrower payable to any Lender, in substantially the form of Exhibit A-1, Exhibit A-2 and Exhibit A-3 hereto (as such promissory note may be amended, endorsed or otherwise modified from time to time), evidencing the aggregate Obligations of the Borrower to such Lender resulting from outstanding Revolving Loans, Reducing Loans, Term Loans or Reimbursement Obligations, and also means all other promissory notes accepted from time to time in substitution therefor or renewal thereof.

             “Obligations” means all obligations (monetary or otherwise) of the Borrower and each other Obligor arising under or in connection with this Agreement, the Notes, the Reimbursement Obligations and each other Loan Document.  In addition, all references to “Obligations” in the Collateral Documents and in Sections 4.8, 4.9 and 10.17 shall, in addition to the foregoing, also include all present and future indebtedness, liabilities and obligations (and all renewals and extensions thereof or any part thereof) now or hereafter owed by the Borrower and each other Obligor to any Lender or any Affiliate of a Lender pursuant to a Lender Hedging Agreement.

             “Obligor” means the Borrower or any other Person (other than the Administrative Agent or any Lender) obligated under any Loan Document.

             “Oil and Gas” means petroleum, natural gas and other related hydrocarbons or minerals or any of them and all other substances produced or extracted in association therewith.

             “Oil and Gas Properties” means Hydrocarbon Interests now owned or hereafter acquired by the Borrower and its Subsidiaries and contracts executed in connection therewith and all tenements, hereditaments, appurtenances, and properties belonging, affixed or incidental to such Hydrocarbon Interests, including, without limitation, any and all property, real or personal, now owned by the Borrower and its Subsidiaries and situated upon or to be situated upon, and used, built for use, or useful in connection with the operating, working or developing of such Hydrocarbon Interests, including, without limitation, any and all petroleum and/or natural gas wells, buildings, structures, field separators, liquid extractors, plant compressors, pumps, pumping units, field gathering systems, tank and tank batteries, fixtures, valves, fittings, machinery and parts, engines, boilers, liters, apparatus, equipment, appliances, tools, implements, cables, wires, towers, taping, tubing and rods, surface leases, rights–of–way, easements and servitudes, and all additions, substitutions, replacements for, fixtures and attachments to any and all of the foregoing owned directly or indirectly by the Borrower and its Subsidiaries.

             “Organic Document” means, relative to any Obligor, its certificate of incorporation, articles of formation, operating agreement, its by-laws and all shareholder agreements, voting trusts and similar arrangements applicable to any of its authorized shares of capital stock or equity interests.

             “Participant” is defined in Section 10.11.

             “PBGC” means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA.

             “Pension Plan” means a “pension plan”, as such term is defined  in section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a multiemployer plan as defined in section 4001(a)(3) of ERISA), and to which the Borrower or any corporation, trade or business that is, along with the Borrower, a member of a Controlled Group, may have liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.

             “Percentage” means, relative to any Lender, the percentage set forth opposite its signature to this Agreement or set forth in a Lender Assignment Agreement, as such percentage may be adjusted from time to time pursuant to Lender Assignment Agreement(s) executed by such Lender and its Assignee Lender(s) and delivered pursuant to Section 10.11; provided, the sum of all Percentages for all Lenders shall never be less than 100%.

             “Permitted Liens” has the meaning set forth in Section 7.2.3.

             “Person” means any natural person, corporation, partnership, firm, association, trust, government, governmental agency or any other entity, whether acting in an individual, fiduciary or other capacity.

             “PIK Notes” means Subordinated Notes that may be issued pursuant to the Subordinated Debt Documents in connection with the Borrower’s exercise of its option to elect to pay accrued and unpaid interest on Subordinated Debt by delivery of additional Subordinated Notes.

             “Plan” means any Pension Plan or Welfare Plan.

             “Post-Closing Security Documents” is defined in Schedule II attached hereto.

             “Principal Payment Date” is defined in Section 3.1(b).

             “Principal Repayment Schedule” is defined in Section 3.1(b).

             “Quarterly Payment Date” means the last day of each March, June, September, and December or, if any such day is not a Business Day, the next succeeding Business Day.

             “Quarterly Status Report” means a status report prepared quarterly by the Borrower in form, scope and content acceptable to the Administrative Agent, setting forth as of such quarter then ended (i) detailing production from the Oil and Gas Properties, the volumes of Oil and Gas produced and saved, the volumes of Oil and Gas sold, gross revenue, net income, related leasehold operating expenses, severance taxes, other taxes, capital costs and any production imbalances incurred during such period, (ii) describing the Borrower’s position regarding its Hedging Agreements with respect to its Oil and Gas Properties including the amount contracted in volumes and as a percentage of the Company’s total anticipated production, length of contracts, and the price or prices hedged, and (iii) such additional information with respect to any of Borrower’s Oil and Gas Properties as may be reasonably requested by Administrative Agent.

             “Reducing Loan” is defined in Section 2.1.3.

             “Reducing Loan Commitment” means, relative to any Lender, such Lender’s obligation to make Reducing Loans pursuant to Section 2.1.3.

             “Reducing Loan Commitment Amount” means an amount equal to the lesser of (i) the Facility A Revolving Loan Commitment Amount, or (ii) the aggregate amount of Revolving Loans outstanding on the Conversion Date, as such amount may be reduced from time to time pursuant to Section 2.2.

             “Reducing Loan Commitment Termination Date” means the earliest of (a) August 9, 2005; (b) the date on which the Reducing Loan Commitment Amount is terminated in full or reduced to zero pursuant to Section 2.2; and (c) the date on which any Commitment Termination Event occurs.  Upon the occurrence of any event described in clause (b) or (c), the Revolving Loan Commitments shall terminate automatically and without any further action.

             “Redeemable Preferred Stock” means preferred stock that has, or is convertible into any security that has, mandatory redemption or repurchase requirements (other than those exercisable solely at the option of the issuer of said stock) on or prior to the date set forth in clause (d) of the definition of Stated Maturity Date.

             “Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System.

             “Reimbursement Obligation” is defined in Section 2.7.6.

             “Release” means a “release”, as such term is defined in CERCLA.

             “Required Lenders” means, at any time, the Administrative Agent and Lenders holding at least 66% of the then aggregate outstanding principal amount of the Notes then held by the Lenders, or, if no such principal amount is then outstanding, the Administrative Agent and Lenders having at least 66% of the Commitments.

             “Reserve Report” means a report, prepared in accordance with guidelines and requirements of the Securities and Exchange Commission and in form acceptable to the Administrative Agent, covering proved developed and proved undeveloped Oil and Gas reserves attributable to Borrower’s and its Subsidiaries’ Oil and Gas Properties and setting forth with respect thereto, (i) the total quantity of proved developed and proved undeveloped reserves (separately classified as to producing, shut–in, behind pipe, and undeveloped), (ii) the estimated future net revenues and cumulative estimated future net revenues, (iii) the present discounted value of future net revenues, and (iv) such other information and data with respect to the Oil and Gas Properties as the Administrative Agent may reasonably request.

             “Resource Conservation and Recovery Act” means the Resource Conservation and Recovery Act, 42 U.S.C. Section 690, et seq., as in effect from time to time.

             “Revolving Facility A Availability Period” has the meaning set forth in Section 2.1.1(c).

             “Revolving Facility A” means the credit facility described as “Revolving Facility A” in Section 2.1.1.

             “Revolving Facility B” means the credit facility described as “Revolving Facility B” in Section 2.1.1.

             “Revolving Loan” means a loan made pursuant to Section 2.1.1, and includes loans made under Revolving Facility A and Revolving Facility B.

             “Revolving Loan Commitment” means, relative to any Lender, such Lender’s obligation to continue the Existing Loans as Revolving Loans and to make subsequent Revolving Loans pursuant to Section 2.1.1.

             “Revolving Loan Commitment Amount” means the sum of the Facility A Revolving Loan Commitment Amount plus the Facility B Revolving Loan Commitment Amount.

             “Revolving Loan Commitment Termination Date” means the earliest of (a) December 31, 2003; (b) the date on which the Revolving Loan Commitment Amount is terminated in full or reduced to zero pursuant to Section 2.2; and (c) the date on which any Commitment Termination Event occurs.  Upon the occurrence of any event described in clause (b) or (c), the Revolving Loan Commitments shall terminate automatically and without any further action.
Arights” means rights, remedies, powers, privileges and benefits.

             “Stated Amount” of each Letter of Credit means the face amount of such Letter of Credit as such amount is in effect on the issuance date thereof.

             “Stated Expiry Date” is defined in Section 2.7.1.

             “Stated Maturity Date” means (a) in the case of any Revolving Loan under Revolving Facility A, December 31, 2003, (b) in the case of any Revolving Loan under Revolving Facility B, the date that is sixty (60) days after the Effective Date, (c) in the case of any Letter of Credit, August 9, 2005, (d) in the case of any Reducing Loan, August 9, 2005, and (e) in the case of any Term Loan, August 9, 2005.

             “Subordinated Debt” means Indebtedness of the Borrower that the Borrower designates as “Subordinated Indebtedness” hereunder by giving written notice to the Administrative Agent, which Indebtedness is issued upon, and that is governed by documents containing, terms and conditions satisfactory to the Required Lenders in their sole discretion and that is subordinated to the Obligations upon terms and conditions satisfactory to the Required Lenders in their sole discretion.

             “Subordinated Debt Documents” means documents executed in connection with Subordinated Debt.

             “Subordinated Notes” means promissory notes evidencing Subordinated Debt.

             “Subordination Agreement” means a subordination agreement or other agreement containing the terms upon which Subordinated Debt is subordinated to the Obligations.

             “Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Borrower.

             “Tangible Net Worth” means the consolidated net worth of the Borrower and its Subsidiaries (excluding any Redeemable Preferred Stock) after subtracting therefrom the aggregate amount of any Intangible Assets of the Borrower and its Subsidiaries.  “Intangible Assets” means the amount (to the extent reflected in determining consolidated net worth) of all unamortized debt discount and expense (to the extent, if any, recorded as an unamortized deferred charge), unamortized deferred charges, goodwill, franchises, licenses, patents, trademarks, trade names, copyrights, service marks and brand names; provided that for purposes of this definition, consolidated net worth shall be adjusted to exclude non-cash items, including foreign currency translation adjustments, unrealized gains and losses, and mark–to–market adjustments relating to Hedging Agreements, pursuant to GAAP.

             “Target Companies” means the entities being acquired by the Borrower pursuant to the Acquisition Contracts.

             “Taxes” is defined in Section 4.6.

             “Term Loan” means the term loan of each Lender made pursuant to Section 2.1.4.

             “Term Loan Commitment” means, relative to any other Lender, such Lender’s obligation to make a Term Loan pursuant to Section 2.1.4.

             “Term Loan Commitment Amount” means an amount (subject to reduction or cancellation as herein provided) equal to $40,000,000.

             “Term Loan Facility” means the term credit facility as described in and subject to the limitations set forth in Section 2.1.4.

             “Term Loan Note” means the promissory note issued to each Lender under this Agreement to evidence the Borrower’s obligations to repay the Term Loan, each such note to be substantially in the form of Exhibit A-3.

             “Term Loan Principal Debt” means, on any date of determination, the aggregate unpaid principal balance of all Borrowings under the Term Loan Facility.

             “Total Funded Debt” means, as of any date, the sum without duplication of (a) the outstanding principal amount of all Indebtedness of the Borrower and its Subsidiaries of the nature referred to in clauses (a), (b), (c) and (f) of the definition of “Indebtedness” and (b) all Redeemable Preferred Stock, valued at the redemption price thereof; provided, however, in the event that Borrower’s Aworking capital” (determined in accordance with GAAP) is greater than $0 at any time at which the Borrower’s Total Funded Debt is calculated, then Total Funded Debt for such time period shall equal the outstanding principal amount of all Indebtedness of the Borrower and its Subsidiaries of the nature referred to in clauses (a), (b), (c) and (f) of the definition of “Indebtedness” plus all Redeemable Preferred Stock, less cash on hand or Cash Equivalent Investments which are free and clear of all Liens other than Liens securing the Loans.

             “type” means, relative to any Loan, the portion thereof, if any, being maintained as a Base Rate Loan or a LIBO Rate Loan.

             “U.C.C.” means the Uniform Commercial Code, as in effect in the State of Texas.

             “United States” or “U.S.” means the United States of America, its fifty States and the District of Columbia.

             “Watford” shall have the meaning given to it in the Acquisition Contracts.

             “Welfare Plan” means a Awelfare plan”, as such term is defined in section 3(1) of ERISA.

             “West Shore” means West Shore Processing Company, L.L.C., a Michigan limited liability company.

             “West Shore/Basin Purchase Agreement” means that certain Purchase and Sale Agreement, dated as of November 21, 1997, between Michigan Energy Company and MarkWest Michigan.

             “Working Capital Loan Agreement” is defined in the second recital.

             SECTION 1.2  Use of Defined Terms.  Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in this Agreement shall have such meanings when used in the Disclosure Schedule and in each Note, Borrowing Request, Continuation/Conversion Notice, Loan Document, notice and other communication delivered from time to time in connection with this Agreement or any other Loan Document.

             SECTION 1.3  Cross-References.  Unless otherwise specified, references in this Agreement and in each other Loan Document to any Article or Section are references to such Article or Section of this Agreement or such other Loan Document, as the case may be, and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition.

             SECTION 1.4  Accounting and Financial Determinations.  Unless otherwise specified, all accounting terms used herein or in any other Loan Document shall be interpreted, all accounting determinations and computations hereunder or thereunder (including under Section 7.2.4) shall be made, and all financial statements required to be delivered hereunder or thereunder shall be prepared in accordance with, those generally accepted accounting principles (“GAAP”) applied in the preparation of the financial statements referred to in Section 6.5.

ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES

             SECTION 2.1  Commitments.  On the terms and subject to the conditions of this Agreement (including Article V), each Lender severally, to the extent of its Percentage, agrees to make Loans pursuant to the Commitments described in this Section 2.1.

             SECTION 2.1.1              Revolving Loan Commitment.

                           (a)         On the Effective Date, all outstanding Existing Loans shall be amended, renewed, restated, extended and converted (but shall not be deemed to be repaid) to Revolving Loans under this Agreement.

                           (b)        Each Lender severally, but not jointly, agrees to lend to the Borrower such Lender’s Percentage of one or more Borrowings under (i) Revolving Facility A, not to exceed such Lender’s Percentage of the Facility A Revolving Loan Commitment Amount, and (ii) Revolving Facility B, not to exceed such Lender’s Percentage of the Facility B Revolving Loan Commitment Amount.

                           (c)         Subject to the conditions set forth in this Agreement, (i) Revolving Loans under Revolving Facility A shall be available during the periods beginning on the Effective Date and ending on the day prior to the Revolving Loan Commitment Termination Date (the “Revolving Facility A Availability Period”), and (ii) Revolving Loans under Revolving Facility B shall be available during the period beginning on the Effective Date and ending on the day prior to the Stated Maturity Date for Revolving Loans under Revolving Facility B.

                          (d)        On the terms and subject to the conditions hereof, the Borrower may from time to time borrow, prepay and reborrow Revolving Loans.

             SECTION 2.1.2              Commitment to Issue Letters of Credit.  From time to time on any Business Day prior to the Commitment Termination Date, each Issuer will issue, and each Lender will participate in, to the extent of each Lender’s Percentage, the Letters of Credit, in accordance with the terms of Section 2.7.

             SECTION 2.1.3              Reducing Loan Commitment.  Subject to the terms and conditions hereof, on the Conversion Date each Lender will make a Reducing Loan to the Borrower in the amount equal to such Lender’s Percentage of the amounts outstanding on the Conversion Date under the Revolving Loans, or such lesser amount as requested by Borrower by converting Revolving Loans to Reducing Loans (which conversion shall be deemed automatically to have occurred upon satisfaction of such conditions).  From time to time on any Business Day occurring prior to the Reducing Loan Commitment Termination Date, each Lender will make Loans (relative to such Lender, its “Reducing Loans”) to the Borrower equal to such Lender’s Percentage of the aggregate amount of the Borrowing of Reducing Loans requested by the Borrower to be made on such day.  The Commitment of each Lender described in this Section 2.1.3 is herein referred to as its “Reducing Loan Commitment”.  On the terms and subject to the conditions hereof, the Borrower may from time to time borrow, prepay and reborrow Reducing Loans.

             SECTION 2.1.4              Term Loan Commitment.  Subject to and in reliance upon the terms and conditions hereof, each Lender severally, but not jointly, agrees to lend to Borrower in a single disbursement on the Effective Date such Lender’s Percentage of the Term Loan Commitment.  If all or a portion of the Term Loan Principal Debt is paid or prepaid, then the amount so paid or prepaid may not be reborrowed.  Any portion of the Term Loan Commitment that remains undisbursed after the initial disbursement under the Term Loan Facility shall be reduced to zero and cancelled on the date of such initial disbursement.

             SECTION 2.1.5              Lenders Not Required To Make Loans or Issue or Participate in Letters of Credit.  No Lender shall be permitted or required to (a) continue any Existing Loan as a Loan hereunder or to make any Revolving Loan if, after giving effect thereto (i) the aggregate outstanding principal amount of all Revolving Loans of all Lenders, together with all Letter of Credit Outstandings, would exceed the Revolving Loan Commitment Amount, or (ii) the aggregate outstanding principal amount of all Revolving Loans of such Lender, together with its Percentage of all Letter of Credit Outstandings, would exceed such Lender’s Percentage of the Revolving Commitment Amount, or (b) make any Reducing Loan if, after giving effect thereto, (i) the aggregate outstanding principal amount of all Reducing Loans of all Lenders, together with all Letter of Credit Outstandings would exceed the Reducing Loan Commitment Amount, or (ii) the aggregate outstanding principal amount of all Reducing Loans of such Lender, together with its Percentage of all Letter of Credit Outstandings, would exceed such Lender’s Percentage of the Reducing Loan Commitment Amount, or (c) issue (in the case of any Issuer) or participate in (in the case of each Lender) any Letter of Credit if, after giving effect thereto (i) all Letter of Credit Outstandings together with the aggregate outstanding principal amount of all Loans of all Lenders would exceed the Commitment Amount, or (ii) such Lender’s Percentage of all Letter of Credit Outstandings together with the aggregate outstanding principal amount of all Loans of such Lender would exceed such Lender’s Percentage of the Commitment Amount, or (iii) all Letter of Credit Outstandings would exceed the Letter of Credit Sublimit.

             SECTION 2.1.6              Increase in Facility A Revolving Loan Commitment Amount.

                           (a)         During the Revolving Facility A Availability Period, the Borrower may, by written notice (the “Increase Notice”) to the Administrative Agent (and the Administrative Agent shall promptly deliver a copy of such notice to the Lenders), request that the aggregate amount of the Facility A Revolving Loan Commitment Amount be increased by an amount not less than $5,000,000; provided that (i) if such increase is made at a time when no Canadian Facility is in place, then after giving effect to any such increase the Facility A Revolving Loan Commitment Amount hereunder shall not exceed $75,000,000 minus any amount by which the Facility A Revolving Loan Commitment Amount shall have been reduced pursuant to Section 2.2, and (ii) if such increase is made at a time when a Canadian Facility is in place then after giving effect to such increase, the aggregate amount of the Facility A Revolving Loan Commitment Amount hereunder plus the aggregate amount of the commitments of the lenders under the Canadian Facility shall not exceed $110,000,000 minus any amount by which the Facility A Revolving Loan Commitment Amount shall have been reduced pursuant to Section 2.2 and minus any amount by which the commitments of the lenders under such Canadian Facility shall have been reduced pursuant to the provisions of the applicable credit agreement permitting the borrower thereunder to reduce the commitments thereunder.  The Increase Notice shall set forth the amount of the requested increase in the Facility A Revolving Loan Commitment Amount and the date on which such increase is requested to become effective (which shall be not less than 30 days or more than 60 days after the date of such notice), and at the Borrower’s option, may offer to one or more existing Lenders and/or other banks or financial institutions (any such Lender or other bank or other  institution referred to in this clause (a) being called an “Augmenting Lender”) the opportunity to extend credit hereunder or increase their existing Facility A Revolving Loan Commitment Amount in an aggregate amount equal to the proposed increase; provided that no Lender shall be obligated to agree to increase its Facility A Revolving Loan Commitment Amount and, provided further, that each Augmenting Lender, if not already a Lender hereunder, shall be subject to the approval of the Administrative Agent (which approval shall not be unreasonably withheld) and the Borrower and each such Augmenting Lender shall execute all such documentation as the Administrative Agent shall reasonably specify to evidence its Facility A Revolving Loan Commitment Amount and status as a Lender hereunder.

                           (b)        On the effective date (the “Increase Effective Date”) of any increase in the Facility A Revolving Loan Commitment Amount pursuant to this Section 2.1.6 (the “Commitment Increase”), (i) the aggregate principal amount of the Loans outstanding (the “Initial Loans”) immediately prior to giving effect to the Commitment Increase on the Increase Effective Date shall be deemed to be paid, (ii) each Augmenting Lender that shall have been a Lender prior to the Commitment Increase shall pay to the Administrative Agent in same day funds an amount equal to the difference between (A) the product of (1) such Lender’s Percentage of the Commitment (the “Pro Rata Share”) (calculated after giving effect to the Commitment Increase) multiplied by (2) the amount of the Subsequent Loans (as hereinafter defined) and (B) the product of (1) such Lender’s Pro Rata Share (calculated without giving effect to the Commitment Increase) multiplied by (2) the amount of the Initial Loans, (iii) each Augmenting Lender that shall not have been a Lender prior to the Commitment Increase shall pay to Administrative Agent in same day funds an amount equal to the product of (1) such Augmenting Lender’s Pro Rata Share (calculated after giving effect to the Commitment Increase) multiplied by (2) the amount of the Subsequent Loans, and (iv) after the Administrative Agent receives the funds specified in clauses (ii) and (iii) above, the Administrative Agent shall pay to each Lender whose Commitment  is not being increased (a “Non-Increasing Lender”) the portion of such funds that is equal to the difference between (A) the product of (1) such Non-Increasing Lender’s Pro Rata Share (calculated without giving effect to the Commitment Increase) multiplied by (2) the amount of the Initial Loans, and (B) the product of (1) such Non-Increasing Lender’s Pro Rata Share (calculated after giving effect to the Commitment Increase) multiplied by (2) the amount of the Subsequent Loans, (v) after the effectiveness of the Commitment Increase, the Borrower shall be deemed to have made new Borrowings (the “Subsequent Loans”) in an aggregate principal amount of the Initial Loans and of the types and for the Interest Periods specified in a Borrowing Request delivered to the Administrative Agent in accordance with Section 2.2, (vi) each Non-Increasing Lender and each Augmenting Lender shall be deemed to hold its Pro Rata Share of each Subsequent Loan (each calculated after giving effect to the Commitment Increase) and (vii) the Borrower shall pay each Augmenting Lender that shall have been a Lender prior to the Commitment Increase and each Non-Increasing Lender any and all accrued but unpaid interest on the Initial Loans.  The deemed payments made pursuant to clause (i) above in respect of each LIBO Rate Loan shall be subject to indemnification by the Borrower pursuant to the provisions of Section 4.4  if the Increase Effective Date occurs other than on the last day of the Interest Period relating thereto and breakage costs result.

                           (c)         Increases and new Facility A Revolving Loan Commitment Amount created pursuant to this Section 2.1.5 shall become effective on the date specified in the notice delivered by the Borrower pursuant to the first sentence of paragraph (a) above.

                           (d)        No increase in the total Facility A Revolving Loan Commitment Amount (or in the Commitment of any Lender) or addition of a new Lender shall become effective under this Section unless (i) the Borrower shall deliver a certificate of an Authorized Officer, dated as of the Increase Effective Date, certifying that no Default shall have occurred and be continuing and that the representations and warranties of the Borrower contained in this Agreement are true and correct on and as of such date, and (ii) the Administrative Agent shall have received documents and an opinion consistent with those delivered on the Effective Date under Sections 5.1.1 and 5.1.7 as to the corporate authority of the Borrower to borrow hereunder after giving effect to such increase.

                           (e)         Notwithstanding the foregoing, if there is a Canadian Facility in effect, no increase in the Facility A Revolving Loan Commitment Amount may be made pursuant to this Section 2.1.5 unless, after such increase, the Percentage of each Lender hereunder is the same as the pro rata share of such Lender or its Affiliate in the Canadian Facility.

             SECTION 2.2  Reduction of Commitment Amounts.  The Commitment Amounts are subject to reduction from time to time pursuant to this Section 2.2.

             SECTION 2.2.1              Optional.  The Borrower may, from time to time on any Business Day, voluntarily reduce the Commitment Amount; provided, however, that all such reductions shall require at least three Business Days’ prior notice to the Administrative Agent and be permanent, and any partial reduction of any Commitment Amount shall be in a minimum amount of $2,500,000 and in an integral multiple of $500,000.

             SECTION 2.2.2              Mandatory as to Reducing Loans.  On the last day of each fiscal quarter following the Revolving Loan Commitment Termination Date, the Reducing Loan Commitment Amount shall, without any further action, automatically and permanently be reduced by an amount equal to the greater of (a) $3,500,000, and (b) 6.67% of the aggregate Reducing Loan Commitment in effect on such day; provided, however, that on the Stated Maturity Date, the Reducing Loan Commitment Amount shall be zero.  Voluntary reductions of the Reducing Loan Commitment Amount made pursuant to Section 2.2.1 shall be applied to diminish the amount of scheduled reductions to such Commitment Amount thereafter becoming effective pursuant to this Section pro rata.

             SECTION 2.3  Borrowing Procedure.  By delivering a Borrowing Request to the Administrative Agent on or before 10:00 a.m., Central time, on a Business Day, the Borrower may from time to time irrevocably request, (i) on not less than three nor more than five Business Days’ notice, a LIBO Rate Loan or (ii) on not less than the same day or more than five Business Days’ notice, a Base Rate Loan, in a minimum amount of $500,000 and an integral multiple of $500,000, or in the unused amount of the applicable Commitment, if less.  On the terms and subject to the conditions of this Agreement, each Borrowing shall be comprised of the type of Loans, and shall be made on the Business Day specified in such Borrowing Request.  On or before 11:00 a.m., Central time, on such specified Business Day each Lender shall deposit with the Administrative Agent same day funds in an amount equal to such Lender’s Percentage of the requested Borrowing.  Such deposit will be made to an account which the Administrative Agent shall specify from time to time by notice to the Lenders.  To the extent funds are received from the Lenders, the Administrative Agent shall make such funds available to the Borrower by wire transfer to the accounts the Borrower shall have specified in its Borrowing Request.  No Lender’s obligation to make any Loan shall be affected by any other Lender’s failure to make any Loan.

             SECTION 2.4  Continuation and Conversion Elections.  By delivering a Continuation/Conversion Notice to the Administrative Agent on or before 10:00 a.m., Central time, on a Business Day, the Borrower may from time to time irrevocably elect, (i) on not less than three nor more than five Business Days’ notice, in connection with any LIBO Rate Loan or any Base Rate Loan, that all, or any portion in an aggregate minimum amount of $500,000 and an integral multiple of $500,000, of any Loans be, in the case of Base Rate Loans, converted into LIBO Rate Loans or, in the case of LIBO Rate Loans, be continued as a LIBO Rate Loan, and (iii) on or before the last day of the then current Interest Period with respect to a LIBO Rate Loan that such Loan be converted into a Base Rate Loan (in the absence of delivery of a Continuation/ Conversion Notice with respect to any LIBO Rate Loan at least three Business Days before the last day of the then current Interest Period with respect thereto, such LIBO Rate Loan shall, on such last day, automatically convert to a Base Rate Loan); provided, however, that (i) each such conversion or continuation shall be pro rated among the applicable outstanding Loans of all Lenders, and (ii) no portion of the outstanding principal amount of any Loans may be continued as, or be converted into, LIBO Rate Loans when any Default has occurred and is continuing.

             SECTION 2.5  Funding.  Each Lender may, if it so elects, fulfill its obligation to make, continue or convert LIBO Rate Loans hereunder by causing one of its foreign branches or Affiliates (or an international banking facility created by such Lender) to make or maintain such LIBO Rate Loan; provided, however, that such LIBO Rate Loan shall nonetheless be deemed to have been made and to be held by such Lender, and the obligation of the Borrower to repay such LIBO Rate Loan shall nevertheless be to such Lender for the account of such foreign branch, Affiliate or international banking facility.  In addition, the Borrower hereby consents and agrees that, for purposes of any determination to be made for purposes of Sections 4.1, 4.2, 4.3 or 4.4, it shall be conclusively presumed that each Lender elected to fund all LIBO Rate Loans by purchasing Dollar deposits in its LIBOR Office’s interbank eurodollar market.

             SECTION 2.6  Notes.

                           (a)         Revolving Facility A.  Each Lender’s Revolving Loans under a Revolving Loan Commitment and Reducing Loans under a Reducing Loan Commitment, shall be evidenced by a Facility A Revolving Note payable to the order of such Lender in a maximum principal amount equal to such Lender’s Percentage of the original applicable Facility A Revolving Loan Commitment Amount.

                           (b)        Revolving Facility B.  Each Lender’s Revolving Loans under Revolving Facility B shall be evidenced by a Facility B Revolving Note payable to the order of such Lender in a maximum principal amount equal to such Lender’s Percentage of the Facility B Revolving Loan Commitment.

                           (c)         Term Loan Facility.  Each Lender’s Term Loan shall be evidenced by a Term Loan Note payable to the order of such Lender in a maximum principal amount equal to such Lender’s Percentage of the Term Loan Commitment Amount.

                           (d)        The Borrower hereby irrevocably authorizes each Lender to make (or cause to be made) appropriate notations on the grid attached to each of such Lender’s Notes (or on any continuation of such grid), which notations, if made, shall evidence, among other things, the date of, the outstanding principal of, and the interest rate and Interest Period applicable to the Loans evidenced thereby.  Such notations shall be rebuttable presumptive evidence of such amounts; provided however, that the failure of any Lender to make any such notations shall not limit, enlarge or otherwise affect any Obligations of the Borrower or any other Obligor.

             SECTION 2.7   Letters of Credit.

             SECTION 2.7.1              Issuance Requests.  By delivering to the Administrative Agent and the applicable Issuer an Issuance Request on or before 11:30 a.m., Central time, the Borrower may request, from time to time prior to the Commitment Termination Date and on not less than three nor more than ten Business Days’ notice, that such Issuer issue an irrevocable standby letter of credit in such form as may be mutually agreed to by the Borrower and such Issuer (each a “Letter of Credit”), in support of financial obligations of the Borrower incurred in the Borrower’s ordinary course of business and which are described in such Issuance Request.  Upon receipt of an Issuance Request, the Administrative Agent shall promptly notify the Lenders thereof.  Each Letter of Credit shall by its terms: (a) be issued in a Stated Amount which (i) together with all Letter of Credit Outstandings does not exceed the Letter of Credit Sublimit, or (ii) together with all Letter of Credit Outstandings and all outstanding Loans does not exceed (or would not exceed) the then Commitment Amount (as such amount is reduced and is scheduled to reduce prior to the Stated Expiry Date pursuant to Section 2.2); and (b) be stated to expire on a date (its “Stated Expiry Date”) no later than the earlier (i) of one year from its date of issuance and (ii) the Commitment Termination Date.  So long as no Default has occurred and is continuing, by delivery to the applicable Issuer and the Administrative Agent of an Issuance Request at least three but not more than ten Business Days prior to the Stated Expiry Date of any Letter of Credit, the Borrower may request such Issuer to extend the Stated Expiry Date of such Letter of Credit for an additional period not to exceed the earlier of one year from its date of extension and the Reducing Loan Commitment Termination Date.

             SECTION 2.7.2              Issuances and Extensions.  On the terms and subject to the conditions of this Agreement (including Article V), the Issuer shall issue Letters of Credit, and extend the Stated Expiry Dates of outstanding Letters of Credit, in accordance with the Issuance Requests made therefor.  Each Issuer will make available the original of each Letter of Credit which it issues in accordance with the Issuance Request therefor to the beneficiary thereof (and will promptly provide each of the Lenders and the Borrower with a copy of such Letter of Credit) and will notify the beneficiary under any Letter of Credit of any extension of the Stated Expiry Date thereof.

             SECTION 2.7.3              [Intentionally Omitted].

             SECTION 2.7.4              Other Lenders’ Participation.  Each Letter of Credit issued pursuant to Section 2.7.2 shall, effective upon its issuance and without further action, be issued on behalf of all Lenders (including the Issuer thereof) pro rata according to their respective Percentages.  Each Lender shall, to the extent of its Percentage, be deemed irrevocably to have participated in the issuance of such Letter of Credit and shall be responsible to reimburse promptly the Issuer thereof for Reimbursement Obligations which have not been reimbursed by the Borrower in accordance with Section 2.7.5, or which have been reimbursed by the Borrower but must be returned, restored or disgorged by such Issuer for any reason, and each Lender shall, to the extent of its Percentage, be entitled to receive from the Administrative Agent a ratable portion of the letter of credit fees received by the Administrative Agent pursuant to Section 3.3.3, with respect to each Letter of Credit.  In the event that the Borrower shall fail to reimburse any Issuer, or if for any reason Loans shall not be made to fund any Reimbursement Obligation, all as provided in Section 2.7.5 and in an amount equal to the amount of any drawing honored by such Issuer under a Letter of Credit issued by it, or in the event such Issuer must for any reason return or disgorge such reimbursement, such Issuer shall promptly notify each Lender of the unreimbursed amount of such drawing and of such Lender’s respective participation therein.  Each Lender shall make available to such Issuer, whether or not any Default shall have occurred and be continuing, an amount equal to its respective participation in same day or immediately available funds at the office of such Issuer specified in such notice not later than 11:30 a.m., Central time, on the Business Day (under the laws of the jurisdiction of such Issuer) after the date notified by such Issuer.  In the event that any Lender fails to make available to such Issuer the amount of such Lender’s participation in such Letter of Credit as provided herein, such Issuer shall be entitled to recover such amount on demand from such Lender together with interest at the daily average Federal Funds Rate for three Business Days (together with such other compensatory amounts as may be required to be paid by such Lender to the Administrative Agent pursuant to the Rules for Interbank Compensation of the council on International Banking or the Clearinghouse Compensation Committee, as the case may be, as in effect from time to time) and thereafter at the Alternate Base Rate plus 2%.  Nothing in this Section shall be deemed to prejudice the right of any Lender to recover from any Issuer any amounts made available by such Lender to such Issuer pursuant to this Section in the event that it is determined by a court of competent jurisdiction that the payment with respect to a Letter of Credit by such Issuer in respect of which payment was made by such Lender constituted gross negligence or wilful misconduct on the part of such Issuer.  Each Issuer shall distribute to each other Lender which has paid all amounts payable by it under this Section with respect to any Letter of Credit issued by such Issuer such other Lender’s Percentage of all payments received by such Issuer from the Borrower in reimbursement of drawings honored by such Issuer under such Letter of Credit when such payments are received.

             SECTION 2.7.5              Disbursements.  Each Issuer will notify the Borrower and the Administrative Agent promptly of the presentment for payment of any Letter of Credit, together with notice of the date (the “Disbursement Date”) such payment shall be made.  Subject to the terms and provisions of such Letter of Credit, the applicable Issuer shall make such payment to the beneficiary (or its designee) of such Letter of Credit.  Prior to 11:30 a.m., Central time, on the Disbursement Date, the Borrower will reimburse the applicable Issuer for all amounts which it has disbursed under the Letter of Credit.  In the event the applicable Issuer is not reimbursed by the Borrower on the Disbursement Date, or if such Issuer must for any reason return or disgorge such reimbursement, the Lenders (including such Issuer) shall, on the terms and subject to the conditions of this Agreement, fund the Reimbursement Obligation therefor by making, on the next Business Day, Loans which are Base Rate Loans as provided in Section 2.1.2 or 2.1.3 (the Borrower being deemed to have given a timely Borrowing Request therefor for such amount); provided, however, for the purpose of determining the availability of the Commitments to make Loans immediately prior to giving effect to the application of the proceeds of such Loans, such Reimbursement Obligation shall be deemed not to be outstanding at such time.  To the extent the applicable Issuer is not reimbursed in full in accordance with the preceding sentences, the Borrower’s Reimbursement Obligation shall accrue interest at a fluctuating rate equal to the Alternate Base Rate, plus the Applicable Margin plus a margin of 2% per annum, payable on demand.

             SECTION 2.7.6              Reimbursement.  The Borrower’s obligation (a “Reimbursement Obligation”) under Section 2.7.5 to reimburse an Issuer with respect to each Disbursement (including interest thereon), and each Lender’s obligation to make participation payments in each drawing which has not been reimbursed by the Borrower, shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim, or defense to payment which the Borrower may have or have had against any Lender or any beneficiary of a Letter of Credit, including any defense based upon the occurrence of any Default, any draft, demand or certificate or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient, the failure of any disbursement to conform to the terms of the applicable Letter of Credit (if, in the applicable Issuer’s good faith opinion, such disbursement is determined to be appropriate) or any non-application or misapplication by the beneficiary of the proceeds of such disbursement, or the legality, validity, form, regularity, or enforceability of such Letter of Credit; provided, however, that nothing herein shall adversely affect the right of the Borrower or any Lender to commence any proceeding against the applicable Issuer for any wrongful disbursement made by such Issuer under a Letter of Credit as a result of acts or omissions constituting gross negligence or wilful misconduct on the part of such Issuer.

             SECTION 2.7.7              Deemed Disbursements.  Upon either (i) the occurrence and during the continuation of an Event of Default pursuant to Section 8.1.9 or the occurrence of the Commitment Termination Date or (ii) the declaration by the Administrative Agent of all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable and/or the Commitments (if not theretofore terminated) to be terminated as provided in Section 8.3, an amount equal to that portion of Letter of Credit Outstandings attributable to outstanding and undrawn Letters of Credit shall, at the election of the applicable Issuer acting on instructions from the Required Lenders, and without demand upon or notice to the Borrower, be deemed to have been paid or disbursed by such Issuer under such Letters of Credit (notwithstanding that such amount may not in fact have been so paid or disbursed), and, upon notification by such Issuer to the Administrative Agent and the Borrower of its obligations under this Section, the Borrower shall be immediately obligated to reimburse such Issuer the amount deemed to have been so paid or disbursed by such Issuer.  Any amounts so received by such Issuer from the Borrower pursuant to this Section shall be held as collateral security for the repayment of the Borrower’s obligations in connection with the Letters of Credit issued by such Issuer.  All amounts on deposit pursuant to this Section 2.7.7 shall, until their application to any Obligation or their return to the Borrower, as the case may be, at the Borrower’s written request, be invested in high grade short-term liquid investments acceptable to Administrative Agent and designated by the Borrower, which investments shall be held by the Administrative Agent as additional collateral security for the repayment of the Borrower’s Obligations under and in connection with the Letters of Credit and all other Obligations.  Any losses, net of earnings, and reasonable fees and expenses of such investments shall be charged against the principal amount invested.  The Administrative Agent and the Lenders shall not be liable for any loss resulting from any investment made by the Administrative Agent at the Borrower’s request.  The Administrative Agent is not obligated hereby, or by any other Loan Document, to make or maintain any investment, except upon written request by the Borrower.  At any time when such Letters of Credit shall terminate and all Obligations to each Issuer are either terminated or paid or reimbursed to such Issuer in full, the Obligations of the Borrower under this Section shall be reduced accordingly (subject, however, to reinstatement in the event any payment in respect of such Letters of Credit is recovered in any manner from such Issuer), and such Issuer will return to the Borrower the excess, if any, of (a) the aggregate amount held by such Issuer and not theretofore applied by such Issuer to any Reimbursement Obligation over (b) the aggregate amount of all Reimbursement Obligations to such Issuer pursuant to this Section, as so adjusted.  At such time when all Events of Default shall have been cured or waived, if the Reducing Loan Commitment Termination Date shall not have occurred for any reason, each Issuer shall return to the Borrower all amounts then on deposit with such Issuer pursuant to this Section.

             SECTION 2.7.8              Nature of Reimbursement Obligations.  The Borrower shall assume all risks of the acts, omissions, or misuse of any Letter of Credit by the beneficiary thereof.  Neither any Issuer nor any Lender (except to the extent of its own gross negligence or wilful misconduct) shall be responsible for: (a) the form, validity, sufficiency, accuracy, genuineness, or legal effect of any Letter of Credit or any document submitted by any party in connection with the application for and issuance of a Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent, or forged;  (b) the form, validity, sufficiency, accuracy, genuineness, or legal effect of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof in whole or in part, which may prove to be invalid or ineffective for any reason; (c) failure of the beneficiary to comply fully with conditions required in order to demand payment under a Letter of Credit; (d) errors, omissions, interruptions, or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex, facsimile or otherwise; or (e) any loss or delay in the transmission or otherwise of any document or draft required in order to make a Disbursement under a Letter of Credit or of the proceeds thereof.  None of the foregoing shall affect, impair, or prevent the vesting of any of the rights or powers granted any Issuer or any Lender hereunder.  In furtherance and extension, and not in limitation or derogation, of any of the foregoing, any action taken or omitted to be taken by any Issuer in good faith shall be binding upon the Borrower and shall not put such Issuer under any resulting liability to the Borrower.

             SECTION 2.7.9              Increased Costs; Indemnity.  If by reason of (a) any change in applicable law, regulation, rule, decree or regulatory requirement or any change in the interpretation or application by any judicial or regulatory authority of any law, regulation, rule, decree or regulatory requirement, or (b) compliance by any Issuer or any Lender with any direction, or requirement of any governmental or monetary authority, including Regulation D of the F.R.S. Board: (i) any Issuer or any Lender shall be subject to any tax (other than taxes on net income and franchises), levy, charge or withholding of any nature or to any variation thereof or to any penalty with respect to the maintenance or fulfillment of its obligations under this Section 2.7, whether directly or by such being imposed on or suffered by such Issuer or such Lender; (ii) any reserve, deposit or similar requirement is or shall be applicable, increased, imposed or modified in respect of any Letters of Credit issued by any Issuer or participations therein purchased by any Lender; or (iii) there shall be imposed on any Issuer or any Lender any other condition regarding this Section 2.7, any Letter of Credit or any participation therein, and the result of the foregoing is directly to increase the cost to such Issuer or such Lender of issuing or maintaining any Letter of Credit or of purchasing or maintaining any participation therein, or to reduce any amount receivable in respect thereof by such Issuer or such Lender, then and in any such case such Issuer or such Lender may, at any time after the additional cost is incurred or the amount received is reduced, notify the Administrative Agent and the Borrower thereof, and the Borrower shall pay within 10 days of demand such amounts as such Issuer or Lender may in good faith specify to be necessary to compensate such Issuer or Lender for such additional cost or reduced receipt, together with interest on such amount from the date demanded until payment in full thereof at a rate equal at all times to the Alternate Base Rate plus the Applicable Margin per annum.  The determination by such Issuer or Lender, as the case may be, of any amount due pursuant to this Section, as set forth in a statement setting forth the calculation thereof in reasonable detail, shall be rebuttable presumptive evidence of such amounts.

             In addition to amounts payable as elsewhere provided in this Section 2.7, the Borrower hereby indemnifies, exonerates and holds each Issuer, the Administrative Agent and each Lender harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether such Issuer, the Administrative Agent or such Lender is a party to the action for which indemnification is sought), including reasonable attorneys’ fees and disbursements, which such Issuer, the Administrative Agent or such Lender may incur or be subject to as a consequence, direct or indirect, of the issuance of the Letters of Credit, other than as a result of the gross negligence or wilful misconduct of such Issuer as determined by a court of competent jurisdiction, or the failure of such Issuer to honor a drawing under any Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority.

ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES

             SECTION 3.1  Repayments and Prepayments.  (a) The Borrower shall repay in full the unpaid principal amount of each Loan upon the Stated Maturity Date therefor; it being understood that, subject to satisfaction of the terms and conditions hereof, repayment on the Stated Maturity Date of the Revolving Loans under Revolving Facility A shall be by converting the then outstanding balances of the Revolving Loans under Revolving Facility A to Reducing Loans as provided in Section 2.1.3.  Each prepayment of any Loans made pursuant to this Section shall be without premium or penalty, except as may be required by Section 4.4.  No voluntary prepayment of principal of any Reducing Loans shall cause a reduction in the Reducing Loan Commitment Amount or the Revolving Loan Commitment Amount.

                           (b)        The Term Loan.  The Borrower shall repay the principal of and interest on the Term Loans as follows:  The Borrower shall make principal payments on each date set forth below (each, a “Principal Payment Date”), in an amount equal to the dollar amount set forth below opposite such date.  Each principal payment made on a Principal Payment Date shall be made together with accrued and unpaid interest thereon.

Principal Payment Date	Amount of Payment
March 31, 2002	$2,800,000
June 30, 2002	$2,800,000
September 30, 2002	$2,800,000
December 31, 2002	$3,250,000
March 31, 2003	$3,250,000
June 30, 2003	$3,250,000
September 30, 2003	$3,250,000
December 31, 2003	$2,325,000
March 31, 2004	$2,325,000
June 30, 2004	$2,325,000
September 30, 2004	$2,325,000
December 31, 2004	$2,325,000
March 31, 2005	$2,325,000
June 30, 2005	$2,325,000
August 9, 2005	The remaining principal balance of the Term Loan
Total:	$40,000,000

             SECTION 3.1.1              Optional Prepayment.  At any time prior to the Stated Maturity Date, the Borrower may, from time to time on any Business Day, make a voluntary prepayment, in whole or in part, of the outstanding principal amount of any Loans; provided, however, that (a) any such prepayment shall be made pro rata among Loans of the same type and, if applicable, having the same Interest Period of all Lenders, (b) no such prepayment of any LIBO Rate Loan may be made on any day other than the last day of the Interest Period for such Loan, (c) all such voluntary prepayments (i) of LIBO Rate Loans, shall require at least three (3) Business Days’ prior written notice to the Administrative Agent, and (ii) of Base Rate Loans, shall require prior written notice on the date of prepayment to the Administrative Agent, and (d) all such voluntary partial prepayments shall be in an aggregate minimum amount of $500,000 and an integral multiple of $500,000.

             SECTION 3.1.2              Mandatory Prepayment on Reducing Loans.  The Borrower shall, on each date when any reduction in the Reducing Loan Commitment Amount shall become effective, including pursuant to Section 2.2, make a mandatory prepayment of all Reducing Loans, equal to the excess, if any, of the then aggregate outstanding principal amount of all Reducing Loans together with Letter of Credit Outstandings over the Reducing Loan Commitment Amount as so reduced.

             SECTION 3.1.3              Mandatory Prepayment on Acceleration.  The Borrower shall, immediately upon any acceleration of the Stated Maturity Date of any Loans pursuant to Section 8.2 or Section 8.3, repay all Loans, unless, pursuant to Section 8.3, only a portion of all Loans is so accelerated.

             SECTION 3.1.4              Prepayments of Term Loans.  All prepayments of the Term Loans made on or before September 30, 2003 will be applied first to reduce pro rata the amount of the remaining installments through September 30, 2003, and secondly, to reduce pro rata the amount of the remaining installments through June 30, 2005.  Prepayments made after September 30, 2003 will be applied to reduce pro rata the amount of the remaining installments.

             SECTION 3.2   Interest Provisions.  Interest on the outstanding principal amount of Loans shall accrue and be payable in accordance with this Section 3.2.

             SECTION 3.2.1              Rates.  Pursuant to an appropriately delivered Borrowing Request or Continuation/Conversion Notice, the Borrower may elect that Loans comprising a Borrowing accrue interest at a rate per annum: (a) on that portion maintained from time to time as a Base Rate Loan, equal to the Alternate Base Rate plus the Applicable Margin from time to time in effect; and (b) on that portion maintained as a LIBO Rate Loan, during each Interest Period applicable thereto, equal to the sum of the LIBO Rate (Reserve Adjusted) for such Interest Period plus the Applicable Margin.

             All LIBO Rate Loans shall bear interest from and including the first day of the applicable Interest Period to (but not including) the last day of such Interest Period at the interest rate determined as applicable to such LIBO Rate Loan.

             SECTION 3.2.2              Default Rate.  While any Event of Default exists or after acceleration, the Borrower shall pay upon demand interest (after as well as before judgment) on the principal amount of all outstanding Obligations at a fluctuating rate per annum equal to the Alternate Base Rate plus the Applicable Margin plus 2%; provided, however, that with respect to a LIBO Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including any Applicable Margin) otherwise applicable to such Loan plus 2% per annum, but in any event not to exceed the maximum rate permitted by applicable law.

             SECTION 3.2.3              Payment Dates.  Interest accrued on each Loan shall be payable, without duplication: (a) on the Stated Maturity Date therefor; (b) on the date of any payment or prepayment, in whole or in part, of principal outstanding on such Loan; (c) with respect to Base Rate Loans, on each Quarterly Payment Date occurring after the Effective Date; (d) with respect to LIBO Rate Loans, the last day of each applicable Interest Period (and, if such Interest Period shall exceed 90 days, on the 90th day of such Interest Period); (e) with respect to any Base Rate Loans converted into LIBO Rate Loans on a day when interest would not otherwise have been payable pursuant to clause (c), on the date of such conversion; and (f) on that portion of any Loans the Stated Maturity Date of which is accelerated pursuant to Section 8.2 or Section 8.3, immediately upon such acceleration.  Interest accrued on Loans or other monetary Obligations arising under this Agreement or any other Loan Document after the date such amount is due and payable (whether on the Stated Maturity Date, upon acceleration or otherwise) shall be payable upon demand.

             SECTION 3.3   Fees.  The Borrower agrees to pay the fees set forth in this Section 3.3.  All such fees shall be non-refundable.

             SECTION 3.3.1              Commitment Fee.  The Borrower agrees to pay to the Administrative Agent for the account of each Lender, for the period (including any portion thereof when any of its Commitments are suspended by reason of the Borrower’s inability to satisfy any condition of Article V) commencing on the Effective Date and continuing through the final Commitment Termination Date, a Commitment Fee on such Lender’s Percentage of the sum of the average daily unused portion of the Commitment Amount (outstanding Loans and Letters of Credit being deemed to be usage hereunder).  Such Commitment Fee shall be payable by the Borrower in arrears, on each Quarterly Payment Date, commencing with the first such day following the Effective Date, and on each Commitment Termination Date.

             SECTION 3.3.2              Administrative Agent’s Fee.  To the Administrative Agent for its own account, the fees provided in the fee letter dated August 10, 2001 between the Borrower, the Administrative Agent and Banc of America Securities LLC.

             SECTION 3.3.3              Letter of Credit Fees.  (a) The Borrower agrees to pay to the Administrative Agent, for the account of each Lender, a fee for each Letter of Credit for the period from and including the date of the issuance of such Letter of Credit to (but not including) the date upon which such Letter of Credit expires, at a per annum rate equal to the Applicable Margin on the outstanding face amount of each Letter of Credit.  Such fee shall be payable by the Borrower in arrears on each Quarterly Payment Date, and on the Commitment Termination Date for any period then ending for which such fee shall not theretofore have been paid, commencing on the first such date after the issuance of such Letter of Credit.

                           (b)        The Borrower agrees to pay to the Administrative Agent, for the account of the Issuer, a Letter of Credit fronting fee for each Letter of Credit upon the issuance of each Letter of Credit in an amount equal to the greater of (i) $500 or (ii) one-eight of one percent (1/8 of 1%) calculated on the face amount thereof.

ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS

             SECTION 4.1   Fixed Rate Lending Unlawful.  If any Lender shall determine (which determination shall, upon notice thereof to the Borrower and the Lenders, be conclusive and binding on the Borrower) that the introduction of or any change in or in the interpretation of any law makes it unlawful, or any central bank or other governmental authority asserts that it is unlawful, for such Lender to make, continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan of a certain type, the obligations of all Lenders to make, continue, maintain or convert any such Loans shall, upon such determination, forthwith be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist, and all LIBO Rate Loans of such type shall automatically convert into Base Rate Loans at the end of the then current Interest Periods with respect thereto or sooner, if required by such law or assertion.

             SECTION 4.2   Deposits Unavailable.  If the Administrative Agent shall have determined that (a) Dollar deposits in the relevant amount and for the relevant Interest Period are not available to the Lenders in their relevant markets; or (b) by reason of circumstances affecting BofA’s relevant market, adequate means do not exist for ascertaining the interest rate applicable hereunder to LIBO Rate Loans, then, upon notice from the Administrative Agent to the Borrower and the Lenders, the obligations of all Lenders under Section 2.3 and Section 2.4 to make or continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall forthwith be suspended until the Administrative Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist.

             SECTION 4.3   Increased LIBO Rate Loan Costs, etc.  The Borrower agrees to reimburse each Lender for any increase in the cost to such Lender of, or any reduction in the amount of any sum receivable by such Lender in respect of, making, continuing or maintaining (or of its obligation to make, continue or maintain) any Loans as, or of converting (or of its obligation to convert) any Loans into, LIBO Rate Loans.  Such Lender shall promptly notify the Administrative Agent and the Borrower in writing of the occurrence of any such event, such notice to state, in reasonable detail, the reasons therefor and the additional amount required fully to compensate such Lender for such increased cost or reduced amount; provided, that no Lender shall give such notice unless it is generally charging borrowers similarly situated to the Borrower with similar agreements with such Lender such amounts.  Such additional amounts shall be payable by the Borrower directly to such Lender within five days of its receipt of such notice, and such notice shall be rebuttable presumptive evidence of such amounts.

             SECTION 4.4   Funding Losses.  In the event any Lender shall incur any loss or expense (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to make, continue or maintain any portion of the principal amount of any Loan as, or to convert any portion of the principal amount of any Loan into, a LIBO Rate Loan) as a result of (a) any conversion or repayment or prepayment of the principal amount of any LIBO Rate Loans on a date other than the scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.1 or otherwise; (b) any Loans not being made as LIBO Rate Loans in accordance with the Borrowing Request therefor; or (c) any Loans not being continued as, or converted into, LIBO Rate Loans in accordance with the Continuation/ Conversion Notice therefor, then, upon the written notice of such Lender to the Borrower (with a copy to the Administrative Agent), the Borrower shall, within five days of its receipt thereof, pay directly to such Lender such amount as will (in the reasonable determination of such Lender) reimburse such Lender for such loss or expense.  Such written notice (which shall include calculations in reasonable detail) and shall be rebuttable presumptive evidence of such amounts.

             SECTION 4.5   Increased Capital Costs.  If any change in, or the introduction, adoption, effectiveness, interpretation, reinterpretation or phase-in of, any law or regulation, directive, guideline, decision or request of any court, central bank, regulator or other governmental authority affects or would affect the amount of capital required or expected to be maintained by any Lender or any Person controlling such Lender, and such Lender determines (in its discretion exercised in good faith) that the rate of return on its or such controlling Person’s capital as a consequence of its Commitments or the Loans made by such Lender is reduced to a level below that which such Lender or such controlling Person could have achieved but for the occurrence of any such circumstance, then, in any such case upon notice from time to time by such Lender to the Borrower, the Borrower shall immediately pay directly to such Lender additional amounts sufficient to compensate such Lender or such controlling Person for such reduction in rate of return.  A statement of such Lender as to any such additional amount or amounts shall be furnished to Borrower including calculations thereof in reasonable detail and shall be rebuttable presumptive evidence of such amounts.  In determining such amount, such Lender may use any method of averaging and attribution that it (in its discretion exercised in good faith) shall deem applicable.

             SECTION 4.6   Taxes.  All payments by the Borrower of principal of, and interest on, the Loans, all payments in respect of the Reimbursement Obligations and all other amounts payable hereunder shall be made free and clear of and without deduction for any future enacted or increased income, excise, stamp or franchise taxes and other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority, but excluding franchise taxes and taxes imposed on or measured by any Lender’s net income or receipts by the jurisdiction (or any political subdivision thereof) under the laws of which such Lender is organized or maintains an office from which Loans are funded (such non-excluded items being called “Taxes”).  In the event that any withholding or deduction from any payment to be made by the Borrower hereunder is required in respect of any Taxes pursuant to any applicable law, rule or regulation, then the Borrower will (a) pay directly to the relevant authority the full amount required to be so withheld or deducted; (b) promptly forward to the Administrative Agent an official receipt or other documentation satisfactory to the Administrative Agent evidencing such payment to such authority; and (c) pay to the Administrative Agent for the account of the Lenders such additional amount or amounts as is necessary to ensure that the net amount actually received by each Lender will equal the full amount such Lender would have received had no such withholding or deduction been required.  Moreover, if any Taxes are directly asserted against the Administrative Agent or any Lender with respect to any payment received by the Administrative Agent or such Lender hereunder, the Administrative Agent or such Lender may pay such Taxes and the Borrower will promptly pay such additional amounts (including, if incurred as a result of the Borrower’s action, omission or delay, any penalties, interest or expenses) as is necessary in order that the net amount received by such person after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such person would have received had not such Taxes been asserted.

                           If the Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent, for the account of the respective Lenders, the required receipts or other required documentary evidence, the Borrower shall indemnify the Lenders for any incremental Taxes, interest or penalties that may become payable by any Lender as a result of any failure of Borrower to pay the taxing authorities directly where required.  For purposes of this Section 4.6, a distribution hereunder by the Administrative Agent or any Lender to or for the account of any Lender shall be deemed a payment by the Borrower.

                           Each Lender that is organized under the laws of a jurisdiction other than the United States shall, prior to the due date of any payments under the Notes, execute and deliver to the Borrower and the Administrative Agent, on or about the first scheduled payment date in each Fiscal Year, one or more (as the Borrower or the Administrative Agent may reasonably request) United States Internal Revenue Service Forms 4224 or Forms 1001 or such other forms or documents (or successor forms or documents), appropriately completed, as may be applicable to establish the extent, if any, to which a payment to such Lender is exempt from withholding or deduction of Taxes.

             SECTION 4.7   Payments, Computations, etc.  Unless otherwise expressly provided, all payments by the Borrower pursuant to this Agreement, the Notes or any other Loan Document shall be made by the Borrower to the Administrative Agent for the pro rata account of the Lenders entitled to receive such payment.  All such payments required to be made to the Administrative Agent shall be made, without setoff, deduction or counterclaim, not later than 11:00 a.m., Central time, on the date due, in same day or immediately available funds, to such account as the Administrative Agent shall specify from time to time by notice to the Borrower.  Funds received after that time shall be deemed to have been received by the Administrative Agent on the next succeeding Business Day.  The Administrative Agent shall promptly remit in same day funds to each Lender its share, if any, of such payments received by the Administrative Agent for the account of such Lender.  All interest and fees shall be computed on the basis of the actual number of days (including the first day but excluding the last day) occurring during the period for which such interest or fee is payable over a year comprised of 360 days (or, in the case of interest on a Base Rate Loan, 365 days or, if appropriate, 366 days).  Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall (except as otherwise required by clause (c) of the definition of the term “Interest Period” with respect to LIBO Rate Loans) be made on the next succeeding Business Day and such extension of time shall be included in computing interest and fees, if any, in connection with such payment.

             SECTION 4.8   Sharing of Payments.  If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of any Loan, any Reimbursement Obligation or any other Obligation (other than pursuant to the terms of Sections 4.3, 4.4 and 4.5) in excess of its pro rata share of payments then or therewith obtained by all Lenders, such Lender shall purchase from the other Lenders such participations as shall be necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the ratable extent of such recovery together with an amount equal to such selling Lender’s ratable share (according to the proportion of (a) the amount of such selling Lender’s required repayment to the purchasing Lender (b) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered.  The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 4.9) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.  If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section to share in the benefits of any recovery on such secured claim.

             SECTION 4.9   Setoff.  Upon the occurrence of an Event of Default, each Lender shall be entitled to exercise (for the benefit of all Lenders pursuant to Section 4.8) any right of offset or bankers’ lien against each and every account and other property or interest therein that the Borrower or any Obligor may now or hereafter have with, or which is now or hereafter in the possession of, such Lender, to the extent of the full amount of the Obligations.  To secure the Obligations, the Borrower hereby grants to each Lender a continuing security interest in any and all balances, credits, deposits, accounts or moneys of the Borrower then or thereafter maintained with such Lender; provided, however, that any exercise of such security interest shall be subject to the provisions of Section 4.8.  Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender; provided, however, that the failure to give such notice shall not affect the validity of such setoff and application.  The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Lender may have.

ARTICLE V
CONDITIONS TO BORROWING

             SECTION 5.1   Continuation of Existing Loans; Initial Borrowing.  The obligations of the Lenders to continue the Existing Loans as Loans hereunder and to fund the initial Borrowing and to issue the initial Letter of Credit shall be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 5.1.  All certificates, agreements, opinions and other documents delivered shall be in form and substance satisfactory to the Administrative Agent.

             SECTION 5.1.1              Resolutions, etc.  The Administrative Agent shall have received from each Obligor a certificate, dated the date of the initial Borrowing or the issuance of the initial Letter of Credit or of such continuation, of its secretary, assistant secretary, manager or general partner as applicable as to (a) resolutions of its Board of Directors, Managers, or their equivalent then in full force and effect authorizing the execution, delivery and performance of this Agreement, the Notes and each other Loan Document to be executed by it, (b) the articles or certificate of incorporation or organization for such Obligor, (c) the bylaws, operating agreements, or partnership agreement of such Obligor, (d) the incumbency and signatures of those of its officers authorized to act with respect to this Agreement, the Notes and each other Loan Document executed by it, upon which certificate each Lender may conclusively rely until it shall have received a further certificate of the secretary, manager or general partner as applicable of such Obligor canceling or amending such prior certificate, and (e) that the Borrower and its Subsidiaries are in compliance with all of the covenants and agreements contained in this Agreement or any other Loan Document.  The Administrative Agent shall have received from each Obligor certificates of existence and good standing provided by the appropriate governmental officer in its jurisdiction of incorporation and, in the case of certificates of good standing, in each jurisdiction in which its business is conducted.

             SECTION 5.1.2              Delivery of this Agreement, Prior Lender Assignment.  The Administrative Agent shall have received the Prior Lender Assignment, this Agreement, Notes issued pursuant hereto, and each other Closing Date Security Document as defined in Schedule II, duly executed by each party thereto, and in each case in form and substance satisfactory to the Administrative Agent.

             SECTION 5.1.3              Guaranty Agreements.  The Administrative Agent shall have received Amended and Restated Guaranty Agreements, dated the date hereof, duly executed by MarkWest Michigan, West Shore, Basin and Matrex, and shall have received a Guaranty Agreement executed by MarkWest Resources.

             SECTION 5.1.4              Collateral Documents.  The Administrative Agent shall have received executed counterparts of (a) the Closing Date Security Documents, duly executed by the appropriate Obligor, (b) to the extent not previously delivered to Agent certificates, evidencing all of the issued and outstanding shares of capital stock, partnership interests, or membership interests pledged pursuant thereto, which certificates shall in each case be accompanied by undated stock powers duly executed in blank, or, if any securities pledged pursuant thereto are uncertificated securities, confirmation and evidence satisfactory to the Administrative Agent that the security interest in such uncertificated securities has been transferred to and perfected by the Administrative Agent for the benefit of the Lenders in accordance with the Uniform Commercial Code, and (c) search report, dated a date reasonably near to the date of the initial Borrowing, listing all effective financing statements which name the Borrower (under its present name and any previous name) and each of its Subsidiaries as the debtor and which are filed in the jurisdictions in which filings in favor of the Administrative Agent were or will be filed, together with copies of such financing statements, none of which (other than those evidencing Permitted Liens) shall cover any collateral described in the Collateral Documents.

             SECTION 5.1.5              Certificate (Acquisition).  A certificate signed by an Authorized Officer of the Borrower, in form and substance reasonably satisfactory to the Agent and each Lender, representing and warranting that:

             (i)          On and as of the Effective Date, (a) the Acquisition has been consummated in accordance with the terms and conditions of the Acquisition Contracts and in compliance with all material legal and regulatory requirements; (b) all shareholder approvals required for consummation of the Acquisition have been obtained; (c) all third party approvals required for consummation of the Acquisition have been obtained; and (d) all necessary consents and approvals of and filings and registration with, and all other actions in respect of, all Governmental Authorities required for consummation of the Acquisition have been obtained, given, filed or taken and are in full effect and all waiting periods relating thereto have expired without, in any such case, any action being taken by any competent authority that could restrain, prevent or impose any material adverse conditions upon the consummation of the Acquisition pursuant to the Acquisition Contracts or that could seek or threaten any of the foregoing;

             (ii)         On and as of the Effective Date, there does not exist (a) any order, decree, judgment, ruling or injunction which restrains the consummation of the Acquisition in the manner contemplated by the Acquisition  Documents, or (b) except as disclosed on the Disclosure Schedule, any pending or threatened action, suit, investigation or proceeding, which, if adversely determined, could materially and adversely affect the Borrower or any of its Subsidiaries (including the Target Companies and their Subsidiaries), any transaction contemplated hereby or the ability of any Obligor to perform its obligations under the Loan Documents or the ability of the Lenders to exercise their rights thereunder;

             (iii)        The Company has not consented to the Vendors’ (as defined in the Acquisition Contracts) taking any restricted actions during the Interim Period (as defined in the Acquisition Contracts); and

             (iv)       The Acquisition Contracts have not been amended, except as consented by the Required Lenders; all material conditions precedent described in the Acquisition Contracts have been fulfilled in all material respects in accordance with the terms and provisions thereof, and all amendments to the Acquisition Contracts, and waivers to any conditions precedent described in the Acquisition Contracts, have been consented to by the Lenders, and the Borrower (and any other Subsidiary who is a party to the Acquisition Contracts) has complied with the Acquisition Contracts in all material respects.

             SECTION 5.1.6              Closing Certificate.  The Administrative Agent shall have received a certificate signed by an Authorized Officer certifying (A) that the conditions specified in Article V have been satisfied, (B) no Default or Event of Default exists, and (C) since December 31, 2000 there has occurred no event or circumstance which could reasonably be expected to have a Material Adverse Effect.

             SECTION 5.1.7              Opinions of Counsel.  The Administrative Agent shall have received the following, each dated the Effective Date and addressed to the Administrative Agent and all Lenders:  (a) legal opinions from Davis, Graham & Stubbs LLP and from Barry Spector, counsel to the Borrower and its Subsidiaries, substantially in the form of Exhibit E–1 and Exhibit E–4 hereto, (b) a legal opinion from Baker & Botts, Texas counsel to the Borrower and its Subsidiaries, substantially in the form of Exhibit E-2 hereto, (c) a legal opinion from Fraser Milner Casgrain, Canadian Counsel to the Borrower and its Subsidiaries, substantially in the form of Exhibit E–3 hereto, and (d) such opinions of local counsel as the Administrative Agent shall require.

             SECTION 5.1.8              Closing Fees, Expenses, etc.  All fees and expenses to be paid on or before the Effective Date shall have been paid, including attorneys’ fees and expenses to the extent invoiced prior to the Effective Date.

             SECTION 5.1.9              Evidence of Insurance.  The Administrative Agent shall have received certificates of insurance satisfactory to it evidencing the existence of all insurance required to be maintained by the Borrower by this Agreement and the other Loan Documents, which insurance shall list Administrative Agent as additional insured and sole loss payee and be satisfactory to the Administrative Agent.

             SECTION 5.1.10            Projections.  The Administrative Agent shall have received an annual budget for 2001 of the Borrower and its Subsidiaries, together with 3-year projections in form and substance satisfactory to the Lenders, setting forth in reasonable detail the Borrower’s and its Subsidiaries’ consolidated balance sheet, income statement and funds flow for a three-year period commencing January 1, 2001, giving effect to the Canadian Acquisition, certified by the Chief Financial Officer of the Borrower as being the Borrower’s best estimate and based upon information that is then currently available and believed to be correct and upon assumptions believed to be reasonable, and no event shall have occurred, and no condition shall exist, that in the Lenders’ judgment shall be materially inconsistent with the information or the projections provided to the Lenders.

             SECTION 5.1.11            Title.  The Administrative Agent shall have received (a) such title information as the Administrative Agent may require setting forth the status of title acceptable to the Administrative Agent to at least 85% of the value of the Company’s and the Subsidiaries’ Oil and Gas Properties included in the Initial Reserve Reports, and (b) such title information as the Administrative Agent may require setting forth the status of title acceptable to the Administrative Agent to the Borrower’s real estate and facilities.

             SECTION 5.1.12            Initial Reserve Report.  The Administrative Agent shall have received the Initial Reserve Reports in form and substance satisfactory to the Lenders.

             SECTION 5.1.13            Environmental Reports.  The Administrative Agent and the Lenders shall have received environmental assessment reports relating to assets of the Borrower and its Subsidiaries, and the Lenders shall be satisfied with the reports.

             SECTION 5.1.14            Financial Statements.  The Administrative Agent shall have received and, in each case, approved the following financial statements:

             (i)          With respect to the Borrower, audited consolidated financial statements for the fiscal years ended 1998, 1999 and 2000, including balance sheets, income and cash flow statements audited by independent public accountants of recognized national standing and prepared in conformity with GAAP, quarterly financial statements for the first two Fiscal Quarters of 2001, interim monthly financial statements for the months January 2001 through June 2001, monthly working capital needs for 2001 and quarterly for 2002, and a budget for the fiscal year 2001.

             (ii)         With respect to the Target Companies, unaudited consolidated financial statements for the eight months ended March 31, 2001 for the eight Leland-side management holding companies including balance sheet, income and cash flow statements; unaudited consolidated financial statements for the nine months ended March 31, 2001 for Leland Energy Canada Ltd. including balance sheet, income and cash flow statements; and unaudited consolidated financial statements for the eleven months ended June 30, 2001 for the eight Watford-side management holding companies, including balance sheet, income and cash flow statements.

             (iii)        Pro forma consolidated balance sheet of the Borrower and its Subsidiaries as of June 30, 2001 after giving effect to the Canadian Acquisition.

             (iv)       Such other information relating to the Canadian Acquisition as the Administrative Agent may request.

             SECTION 5.1.15            Incentive Payments Agreement.  The Administrative Agent shall have received a copy of the Incentive Payments Agreement to be executed in connection with the Canadian Acquisition.

             SECTION 5.1.16            Other.  The Administrative Agent shall have received such other assurances, certificates, documents, consents or opinions as the Administrative Agent or the Required Lenders may require.

             SECTION 5.2   Conditions Precedent to Initial Reducing Loan.  The obligation of the Lenders to make the initial Reducing Loan shall, in addition to the conditions precedent specified in Section 5.3, be subject to the prior or concurrent satisfaction of each of the conditions precedent set forth in this Section 5.2.

             SECTION 5.2.1              Revolving Loans Paid.  The principal of and accrued interest on the Revolving Loans shall have been paid or be paid in full or converted into Reducing Loans hereunder, and included under the Reducing Loan Commitment, in each case, prior to or concurrently with the making of the initial Reducing Loan.  The Borrower hereby agrees and instructs the Administrative Agent to apply the proceeds of the Reducing Loan to the extent required to the payment in full of the principal of and accrued interest on all Revolving Loans then outstanding and the Administrative Agent agrees to remit such proceeds, if any, for such purpose.

             SECTION 5.2.2              Confirmatory Certificate.  The Administrative Agent shall have received a certificate, in form and substance satisfactory to the Administrative Agent, dated the Conversion Date and signed by an officer of the Borrower acceptable to the Administrative Agent, as to the matters set forth in Section 5.3.1 and such other documents as the Lender may have reasonably requested in support thereof, including, duly executed and updated copies or other confirmations of the continuing effectiveness of any or all of the Loan Documents.

             SECTION 5.3   All Borrowings.  The obligation of each Lender to fund any Loan on the occasion of any Borrowing (including the initial Borrowing) and to issue any Letter of Credit (including the initial Letter of Credit) shall be subject to the satisfaction of each of the conditions precedent set forth in this Section 5.3.

             SECTION 5.3.1              Compliance with Warranties, No Default, etc.  Both before and after giving effect to any Borrowing or Letter of Credit (but, if any Default of the nature referred to in Section 8.1.5 shall have occurred with respect to any other Indebtedness, without giving effect to the application, directly or indirectly, of the proceeds thereof) the following statements shall be true and correct in all material respects (a) the representations and warranties set forth in Article VI, and in each Collateral Document shall be true and correct with the same effect as if then made (unless stated to relate solely to an earlier date, in which case such representations and warranties shall be true and correct as of such earlier date); (b) except as disclosed by the Borrower to the Administrative Agent and the Lenders pursuant to Section 6.7 (i) no labor controversy, litigation, arbitration or governmental investigation or proceeding shall be pending or, to the knowledge of the Borrower, threatened against the Borrower or any of its Subsidiaries which could reasonably be expected to materially adversely affect the Borrower’s and its Subsidiaries’ consolidated business, operations, assets, revenues, properties or prospects or which purports to affect the legality, validity or enforceability of this Agreement, the Notes or any other Loan Document; and (ii) no development shall have occurred in any labor controversy, litigation, arbitration, environmental or governmental investigation or proceeding disclosed pursuant to Section 6.7 which could reasonably be expected to materially adversely affect the consolidated businesses, operations, assets, revenues, properties or prospects of the Borrower and its Subsidiaries; and (c) no Default shall have then occurred and be continuing, and neither the Borrower, any other Obligor, nor any of their Subsidiaries are in material violation of any law or governmental regulation or court order or decree.

             SECTION 5.3.2              Borrowing Request; Compliance Certificate.  (a) The Administrative Agent shall have received a Borrowing Request for such Borrowing or Issuance Request for such Letter of Credit, as the case may be.  Each of the delivery of a Borrowing Request or Issuance Request for such Letter of Credit, as the case may be, and the acceptance by the Borrower of the proceeds of such Borrowing or such Letter of Credit shall constitute a representation and warranty by the Borrower that on the date of such Borrowing (both immediately before and after giving effect to such Borrowing and the application of the proceeds thereof) the statements made in Section 5.3.1 are true and correct.

                           (b)        In addition, if Borrower is unable to make the representations and warranties set forth in paragraph 5 of the form of Borrowing Request attached hereto as Exhibit B, then Borrower shall deliver to the Administrative Agent, not less than ten (10) days prior to the date of requested Borrowing or Issuance Request, a certificate (a “Regulation U Compliance Certificate”) in form and substance satisfactory to the Administrative Agent setting forth calculations demonstrating compliance with Regulation U and, if required by the Administrative Agent, an opinion of counsel (a “Regulation U Opinion”) in form and substance satisfactory to the Administrative Agent stating that the Lenders and the Borrowers are, and after the requested Borrowing or Issuance will be, in compliance with Regulation U.

             SECTION 5.3.3              Satisfactory Legal Form.  All documents executed or submitted pursuant hereto by or on behalf of the Borrower or any of its Subsidiaries or any other Obligors shall be satisfactory in form and substance to the Administrative Agent and its counsel (which satisfaction is acknowledged with respect to any documents conforming to the respective Exhibit attached hereto); and the Administrative Agent and its counsel shall have received all information, approvals, opinions, documents or instruments as the Administrative Agent or its counsel may reasonably request.

ARTICLE VI
REPRESENTATIONS AND WARRANTIES

                           In order to induce the Lenders and the Administrative Agent to enter into this Agreement and to make Loans hereunder, the Borrower represents and warrants unto the Administrative Agent and each Lender as set forth in this Article VI except as otherwise indicated on the Disclosure Schedule:

             SECTION 6.1   Organization, etc.  The Borrower and each of its Subsidiaries is a corporation or limited liability company validly incorporated or organized and existing and in good standing under the laws of the State of its incorporation or formation, is duly qualified to do business and is in good standing as a foreign corporation or limited liability company in each jurisdiction where the nature of its business requires such qualification, and has full power and authority and holds all requisite governmental licenses, permits and other approvals to enter into and perform its Obligations under this Agreement, the Notes and each other Loan Document to which it is a party and to own and hold under lease its property and to conduct its business substantially in accordance with the first recital.

             SECTION 6.2   Due Authorization, Non-Contravention, etc.  The execution, delivery and performance by the Borrower of this Agreement, the Notes and each other Loan Document executed or to be executed by it, and the execution, delivery and performance by each other Obligor of each Loan Document executed or to be executed by it are within the Borrower’s and each such Obligor’s corporate powers, have been duly authorized by all necessary corporate action, and do not (a) contravene the Borrower’s or any such Obligor’s Organic Documents; (b) contravene any contractual restriction, law or governmental regulation or court decree or order binding on or affecting the Borrower or any such Obligor; or (c) result in, or require the creation or imposition of, any Lien on any of any Obligor’s properties.

             SECTION 6.3   Government Approval, Regulation, etc.  No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or other Person is required for the due execution, delivery or performance by the Borrower of this Agreement, the Notes or any other Loan Document to which it is a party.  The Borrower and its Subsidiaries possess all authorizations, approvals, permits and licenses necessary to operate their respective businesses as currently operated and as anticipated to be operated.  Neither the Borrower nor any of its Subsidiaries is an “investment company” within the meaning of the Investment Company Act of 1940, as amended, or a “holding company”, or a “subsidiary company” of a “holding company”, or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company”, within the meaning of the Public Utility Holding Company Act of 1935, as amended.

             SECTION 6.4   Validity, etc.  This Agreement constitutes, and the Notes and each other Loan Document executed by the Borrower will, on the due execution and delivery thereof, constitute, the legal, valid and binding obligations of the Borrower enforceable in accordance with their respective terms; and each Loan Document executed pursuant hereto by each other Obligor will, on the due execution and delivery thereof by such Obligor, be the legal, valid and binding obligation of such Obligor enforceable in accordance with its terms.

             SECTION 6.5   Financial Information.  The consolidated balance sheets of the Borrower and each of its Subsidiaries as at December 31, 2000 and June 30, 2001, and the related consolidated statements of earnings and cash flow of the Borrower and each of its Subsidiaries, copies of which have been furnished to the Administrative Agent and each Lender, have been prepared in accordance with GAAP consistently applied, and present fairly the consolidated financial condition of the corporations covered thereby as at the dates thereof and the results of their operations for the periods then ended, subject, in the case of the June 30, 2001 statements, to normal year-end audit adjustments and the omission of certain footnote disclosures.  The Borrower and each of its Subsidiaries are in compliance with all of their existing financial obligations.

             SECTION 6.6   No Material Adverse Change.  Since December 31, 2000, there has not been any material adverse change in the financial condition, operations, assets, business, properties or prospects of the Borrower and its Subsidiaries.

             SECTION 6.7   Litigation, Labor Controversies, etc.  As of the Effective Date, except as disclosed in Schedule I, there is no pending or, to the knowledge of the Borrower, threatened litigation, action, proceeding, or labor controversy affecting the Borrower or any of its Subsidiaries, or any of their respective properties, businesses, assets or revenues, which could reasonably be expected to materially adversely affect the financial condition, operations, assets, business, properties or prospects of the Borrower or any Subsidiary or which purports to affect the legality, validity or enforceability of this Agreement, the Notes or any other Loan Document.

             SECTION 6.8   Subsidiaries.  The Borrower has no Subsidiaries, except those Subsidiaries (a) which are identified in Item 6.8  (“Existing Subsidiaries”) of the Disclosure Schedule; or (b) which are permitted to have been acquired in accordance with  Section 7.2.5 or 7.2.8.  Each Subsidiary has executed a Guaranty; provided, however that so long as Inverness does not own any assets, Inverness need not execute a Guaranty.

             SECTION 6.9   Ownership of Properties.  The Borrower and each of its Subsidiaries owns good and defensible title to all of its properties and assets, real and personal, tangible and intangible, of any nature whatsoever (including patents, trademarks, trade names, service marks and copyrights), free and clear of all Liens, charges or claims (including infringement claims with respect to patents, trademarks, copyrights and the like) except as permitted pursuant to Section 7.2.3.

             SECTION 6.10 Taxes.  The Borrower and each of its Subsidiaries has filed all tax returns and reports required by law to have been filed by it and has paid all taxes and governmental charges thereby shown to be owing, except any such taxes or charges which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books.

             SECTION 6.11 Pension and Welfare Plans.  During the twelve-consecutive-month period prior to the date of the execution and delivery of this Agreement and prior to the date of any Borrowing hereunder, no steps have been taken to terminate any Pension Plan, and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA.  No condition exists or event or transaction has occurred with respect to any Pension Plan which might result in the incurrence by the Borrower or any member of the Controlled Group of any material liability, fine or penalty.  Except as disclosed in Item 6.11 (“Employee Benefit Plans”) of the Disclosure Schedule, neither the Borrower nor any member of the Controlled Group has any contingent liability with respect to any post-retirement benefit under a Welfare Plan, other than liability for continuation coverage described in Part 6 of Title I of ERISA.

             SECTION 6.12 Compliance with Law.  Neither the Borrower nor any of its Subsidiaries (a) is in violation of any law, statute, ordinance, decree, requirement, order, judgment, rule, regulation (or any interpretation of the foregoing) of, or the terms of any license or permit issued by, any governmental authority; or (b) has failed to obtain any license, permit, franchise or other governmental authorization necessary to ownership of any of their respective properties or the conduct of their respective business; which violation or failure could reasonably be expected to have a Material Adverse Effect.

             SECTION 6.13 Claims and Liabilities.  Except as disclosed to the Lenders in the Disclosure Schedule, neither the Borrower nor any of its Subsidiaries has accrued any liabilities under gas purchase contracts for gas not taken, but for which it is liable to pay if not made up and which, if not paid, would have a Material Adverse Effect.  Except as disclosed to the Lenders in the Disclosure Schedule, no claims exist against the Borrower or its Subsidiaries for gas imbalances which claims if adversely determined would have a Material Adverse Effect.  Except as disclosed to the Lenders in the Disclosure Schedule, no purchaser of product supplied by the Borrower or any of its Subsidiaries has any claim against the Borrower or any of its Subsidiaries for product paid for, but for which delivery was not taken as and when paid for, which claim if adversely determined would have a Material Adverse Effect.

             SECTION 6.14 No Prohibition on Perfection of Collateral Documents.  None of the terms or provisions of any indenture, mortgage, deed of trust, agreement or other instrument to which the Borrower or any of its Subsidiaries is a party or by which the Borrower or any of its Subsidiaries or the property of the Borrower or any of its Subsidiaries is bound (other than documentation governing Permitted Liens described in clauses (a), (c), (q) and (r)) prohibit the filing or recordation of any of the Loan Documents or any other action which is necessary or appropriate in connection with the perfection or maintenance of the Liens on material assets evidenced and created by any of the Loan Documents.    Notwithstanding the foregoing, (i) documents governing a Capitalized Lease Liability or a purchase money Lien permitted by Section 7.2.3(q) and (r) may prohibit other Liens on the asset encumbered by such Lien, and (ii) the Lenders acknowledge that certain real estate leases entered into by Borrower or its Subsidiaries prior to the Effective Date restrict or prohibit Liens on the Borrower’s or its Subsidiary’s leasehold interest.

             SECTION 6.15 Solvency.

                           (a)         Neither the Borrower nor the Borrower and its Subsidiaries, on a consolidated basis, is “insolvent”, as such term is used and defined in the United States Bankruptcy Code, 11 U.S.C. > 101, et seq.

                           (b)        Immediately after the making of each Loan, if any, and issuance of any Letter of Credit, if any, made or issued, as the case may be, and after giving effect to the application of the proceeds of such Loans and Letters of Credit, (i) the value of the assets of the Borrower and its Subsidiaries on a consolidated basis, at a fair valuation, will exceed the debts and liabilities, subordinated, contingent or otherwise, of the Borrower and its Subsidiaries on a consolidated basis; (ii) the present fair saleable value of the property of the Borrower and the Subsidiaries on a consolidated basis will be greater than the amount that will be required to pay the probable liability of the Borrower and its Subsidiaries on a consolidated basis on their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) the Borrower and its Subsidiaries on a consolidated basis will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (iv) the Borrower and its Subsidiaries on a consolidated basis will not have unreasonably small capital with which to conduct the businesses in which they are engaged as such businesses are now conducted and are proposed to be conducted after the date hereof.

                           (c)         The Borrower does not intend to, or to permit any of its Subsidiaries to, and does not believe that it or any of its Subsidiaries will, incur debts beyond its ability to pay such debts as they mature, taking into account the timing of and amounts of cash to be received by it or any such Subsidiary and the timing of the amounts of cash to be payable on or in respect of its Indebtedness or the Indebtedness of any such Subsidiary.

             SECTION 6.16 Environmental Warranties.  In the ordinary course of its business, the Borrower conducts an ongoing review of the effect of Environmental Laws on the business, operations and properties of the Borrower and its Subsidiaries, in the course of which it identifies and evaluates associated liabilities and costs (including any capital or operating expenditures required for clean-up or closure of properties presently owned or operated, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat and any actual or potential liabilities to third parties, including employees, and any related costs and expenses).  On the basis of this review, the Borrower has reasonably concluded that, except as set forth in Schedule I hereto, to the best of its knowledge after due inquiry:

                           (a)         all facilities and property (including underlying groundwater) owned, leased or operated by the Borrower or any of its Subsidiaries are owned, leased or operated by the Borrower and its Subsidiaries in material compliance with all Environmental Laws;

                           (b)        there are no pending or threatened, and to Borrower’s knowledge, there have been no past, continuing (i) claims, complaints, notices or inquiries to, or requests for information received by, the Borrower or any of its Subsidiaries with respect to any alleged violation of any Environmental Law, that, singly or in the aggregate, have or may reasonably be expected to have a Material Adverse Effect, or (ii) claims, complaints, notices or inquiries to, or requests for information received by, the Borrower or any of its Subsidiaries regarding potential liability under any Environmental Law or under any common law theories relating to operations or the condition of any facilities or property (including underlying groundwater) owned, leased or operated by the Borrower and its Subsidiaries that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect;

                           (c)         there have been no Releases of Hazardous Materials at, on or under any property now or previously owned or leased by the Borrower or any of its Subsidiaries that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect;

                           (d)        the Borrower and its Subsidiaries have been issued and are in material compliance with all permits, certificates, approvals, licenses and other authorizations relating to environmental matters and necessary or desirable for their businesses;

                           (e)         no property now or previously owned, leased or operated by the Borrower or any of its Subsidiaries is listed or proposed for listing on the National Priorities List pursuant to CERCLA, or, to the extent that such listing may, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect, on the CERCLIS or on any other federal or state list of sites requiring investigation or clean-up;

                           (f)         there are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any property now or previously owned, leased or operated by the Borrower or any of its Subsidiaries that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect;

                           (g)        none of the Borrower or any of its Subsidiaries has directly transported or directly arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, or, to the extent that such listing may, singly or in the aggregate, have, or may reasonably be expected to have a Material Adverse Effect, on the CERCLIS or on any federal or state list or which is the subject of federal, state or local enforcement actions or other investigations which may lead to material claims against the Borrower or any of its Subsidiaries for any remedial work, damage to natural resources or personal injury, including claims under CERCLA;

                           (h)        there are no polychlorinated biphenyls, radioactive materials or friable asbestos present at any property now or previously owned or leased by the Borrower or any of its Subsidiaries that, singly or in the aggregate, have, or may reasonably be expected to have, a Material Adverse Effect; and

                           (i)          no condition exists at, on or under any property now or previously owned or leased by the Borrower or any of its Subsidiaries which, with the passage of time, or the giving of notice or both, would give rise to material liability under any Environmental Law that, singly or in the aggregate have, or may reasonably be expected to have, a Material Adverse Effect.

             SECTION 6.17 Regulations T, U and X.  The Borrower is not engaged and will not engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock, and no proceeds of any Loans will be used for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation T, U or X.  Terms for which meanings are provided in F.R.S. Board Regulation T, U or X or any regulations substituted therefor, as from time to time in effect, are used in this Section with such meanings.  As of the Effective Date, the Borrower does not own any Margin Stock.

             SECTION 6.18 Accuracy of Information.  All factual information heretofore or contemporaneously furnished by or on behalf of the Borrower in writing to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all other such factual information hereafter furnished by or on behalf of the Borrower to the Administrative Agent or any Lender will be, true and accurate in all material respects on the date as of which such information is dated or certified and as of the date of execution and delivery of this Agreement by the Administrative Agent and such Lender, and such information is not, or shall not be, as the case may be, incomplete by omitting to state any material fact necessary to make such information not misleading.  All estimates and projections delivered to the Administrative Agent or any Lender are or will be based upon information that was available at such time and believed to be correct and upon assumptions believed to be reasonable; however  the Borrower does not warrant that such estimates and projections will ultimately prove to have been accurate.

             SECTION 6.19 Default.  No Default or Event of Default has occurred and is continuing.

             SECTION 6.20 Acquisition Contracts.  True and complete copies of the Acquisition Contracts have been delivered to the Administrative Agent, together with all amendments thereto.  With respect to the Acquisition Contracts, (i) the representations and warranties set forth therein by the Borrower are true and correct in all material respects as of the Effective Date, and to the Borrower’s knowledge, the representations and warranties made by Vendors (as defined therein) are true and correct in all material respects as of the Effective Date and (ii) none of the Borrower or, to the Borrower’s knowledge, Vendors are in default in any material respect under any obligation set forth in the Acquisition Contracts.  The Acquisition Contracts are in full force and effect and no consent or approval by any shareholders of the Borrower, any governmental entity or any other Person is required to consummate the transactions contemplated thereby that has not been obtained by the Borrower or the Vendors as therein defined.  On the Effective Date, all conditions precedent under the Acquisition Contracts to the parties’ obligations to consummate the Canadian Acquisition have been satisfied in all material respects, and concurrently with the initial funding of Loans hereunder, the Canadian Acquisition shall have been consummated in material compliance with applicable requirements of law.

             SECTION 6.21 Boldman Plant; Other Plants.  All assets of the Borrower maintained on the Lands as defined in the Boldman Mortgage, including, without limitation, the Boldman Extraction Plant, (i) constitute “Goods” as defined in Article 9 of the U.C.C., (ii) are not affixed to the Land and are considered mobile Goods, and (iii) may be moved from the Lands to another location and reinstalled without extraordinary cost and effort.

             SECTION 6.22 Oil and Gas Reserves.  The Borrower and each Subsidiary is and will hereafter be, in all material respects, the owner of the Hydrocarbon Interests that it purports to own from time to time in and under its Oil and Gas Properties, together with the right to produce the same.  The Hydrocarbon Interests are not subject to any Lien other than Permitted Liens.  All Oil and Gas have been and will hereafter be produced, sold and delivered in accordance in all material respects with all applicable laws and regulations; each of the Borrower and its Subsidiaries has complied in all material respects and will hereafter use commercially reasonable efforts to comply with all material terms of each oil, gas and mineral lease comprising its Hydrocarbon Interests; and all such oil, gas and mineral leases have been and will hereafter be maintained in full force and effect; provided, however that nothing in this Section 6.22 shall prevent the Borrower or its Subsidiaries from (i) selling or otherwise disposing of assets as permitted by Section 7.2.9 or (ii) abandoning any well or forfeiting, surrendering, releasing or defaulting under any lease in the ordinary course of business and which, in the opinion of the Borrower or its Subsidiaries, is in its best interest, provided that the Borrower and its Subsidiaries is and will hereafter be in compliance with all obligations hereunder.  To the best of the knowledge of the Borrower all agreements pursuant to which Borrower and its Subsidiaries own their Hydrocarbon Interests are and will hereafter be enforceable in all material respects in accordance with their terms except as such may be modified by applicable bankruptcy law or an order of a court in equity.

             SECTION 6.23 Initial Reserve Report.  The Borrower has heretofore delivered to the Administrative Agent a true and complete copy of the Initial Reserve Report covering certain of the Borrower’s Oil and Gas Properties located in Canada, Michigan, New Mexico, and Colorado relating to an evaluation of the Oil and Gas attributable to certain of the Oil and Gas Properties described therein.  To the best knowledge of the Borrower, (i) the assumptions stated or used in the preparation of the Initial Reserve Report are reasonable, (ii) all information furnished by the Borrower to the Independent Engineer for use in the preparation of the Initial Reserve Report was accurate in all material respects and (iii) there has been no material adverse change in the amount of the estimated Oil and Gas shown in the Initial Reserve Report since the date thereof, except for changes which have occurred as a result of production in the ordinary course of business.

ARTICLE VII
COVENANTS

             SECTION 7.1   Affirmative Covenants.  The Borrower agrees with the Administrative Agent and each Lender that, until all Commitments have terminated and all Obligations have been paid and performed in full, the Borrower will perform the obligations set forth in this Section 7.1.

             SECTION 7.1.1              Financial Information, Reports, Notices, etc.  The Borrower will furnish, or will cause to be furnished, to the Administrative Agent sufficient copies of the following financial statements, reports, notices and information to provide one to each Lender:

                           (a)         as soon as available and in any event within (i) (A) 30 days after the end of each month (other than December), and (B) within 45 days after the end of each December, a consolidated balance sheet of the Borrower and its Subsidiaries as of the end of such month and consolidated statements of earnings and cash flow of the Borrower and its Subsidiaries for such month and for the period commencing at the end of the previous Fiscal Year and ending with the end of such month, certified by the Chief Financial Officer of the Borrower (ii) within 45 days after the end of each of the first three quarters of each year, the Borrower’s form 10–Q for such quarter, in each case together with a report, in form and substance satisfactory to the Administrative Agent and the Required Lenders, reconciling the Borrower’s and its Subsidiaries’ actual performance to the most recent budgets and forecasts delivered pursuant to Section 5.1.10 or Section 7.1.1(h)(i) or (ii), as the case may be, certified by the Chief Financial Officer of the Borrower and containing an explanation in reasonable detail for any significant negative variances;

                           (b)        as soon as available and in any event within 90 days after the end of each Fiscal Year of the Borrower, a copy of the annual audit report for such Fiscal Year for the Borrower and its Subsidiaries, including therein consolidated balance sheets of the Borrower and its Subsidiaries as of the end of such Fiscal Year and consolidated statements of earnings and cash flow of the Borrower and its Subsidiaries for such Fiscal Year, certified (without any “going concern” or other qualification) in a manner acceptable to the Administrative Agent and the Required Lenders by PriceWaterhouseCoopers LLP or other independent public accountants acceptable to the Administrative Agent and the Required Lenders, together with certificates from such accountants containing (x) a report on management’s assertion about compliance (together with management’s computation of, and showing compliance) with each of the financial ratios and restrictions contained in Section 7.2.4 and (y) to the effect that, in making the examination necessary for the signing of such annual report by such accountants, they have not become aware of any Default or Event of Default that has occurred and is continuing, or, if they have become aware of such Default or Event of Default, describing such Default or Event of Default and the steps, if any, being taken to cure it; timely delivery of the Borrower’s Form 10-K pursuant to clause (f) below shall be deemed to satisfy this clause (b).

                           (c)         as soon as available and in any event within 45 days after the end of each month, a certificate in the form of Exhibit F, executed by the chief financial officer of the Borrower, showing (in reasonable detail and with appropriate calculations and computations in all respects satisfactory to the Administrative Agent) compliance with the financial covenants set forth in Section 7.2.4 and setting forth such information as is required in such form;

                           (d)        as soon as possible and in any event within three Business Days after the Borrower obtains knowledge of the occurrence of each Default, a statement of the chief financial officer of the Borrower setting forth details of such Default and the action which the Borrower has taken and proposes to take with respect thereto;

                           (e)         as soon as possible and in any event within three (3) Business Days after the Borrower obtains knowledge of any of the following if it could reasonably be expected to result in a Material Adverse Effect if adversely determined: (i) the occurrence of any adverse development with respect to any litigation, action, proceeding, or labor controversy described in Section 6.7, (ii) the commencement of any labor controversy, litigation, action, proceeding of the type described in Section 6.7, notice thereof and copies of all documentation relating thereto, (iii) any adverse development involving, or material default by any party under, or breach by any party of any material contract or agreement to which the Borrower or any Subsidiary is a party or by which it is bound, or (iv) any dispute, litigation, investigation, proceeding or suspension between the Borrower or any Subsidiary and any Governmental Authority;

                           (f)         promptly after the sending or filing thereof, copies of all reports which the Borrower sends to any of its security holders, and all reports and registration statements (without exhibits) which the Borrower or any of its Subsidiaries files with the Securities and Exchange Commission or any national securities exchange;

                           (g)        within three (3) Business Days upon becoming aware of the institution of any steps by the Borrower or any other Person to terminate any Pension Plan, or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under section 302(f) of ERISA, or the taking of any action with respect to a Pension Plan which could result in the requirement that the Borrower furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which could result in the incurrence by the Borrower of any material liability, fine or penalty, or any material increase in the contingent liability of the Borrower with respect to any post-retirement Welfare Plan benefit, notice thereof and copies of all documentation relating thereto;

                           (h)        (i) annually, on or before March 31 of each year and (ii) promptly upon request of the Administrative Agent or the Required Lenders (which requests may not be more frequent than once each quarter), a budget for the year commencing the preceding January 1 and a five-year forecast for the Borrower and its Subsidiaries in form and substance satisfactory to the Administrative Agent and the Required Lenders and consistent with the budget and projections delivered pursuant to Section 5.1.10 and based upon information that is then currently available and believed to be correct and upon assumptions believed to be reasonable;

                           (i)          The Borrower shall deliver to the Administrative Agent, promptly upon sending or receipt, copies of any and all management letters and correspondence relating to management letters, sent or received by the Borrower or any of its Subsidiaries to or from PriceWaterhouseCoopers LLP or other independent public accountants acceptable to the Administrative Agent and the Required Lenders;

                           (j)          As soon as available, but not later than 60 days after the close of each of the first three Fiscal Quarters of each year, beginning with the Fiscal Quarter ending September 30, 2001, and not later than 90 days after the close of each Fiscal Quarter ending on December 31, a Quarterly Status Report as of the last day of the immediately preceding quarter;

                           (k)         On or before April 1, effective as of January 1, of each year during the term of this Agreement, a Reserve Report prepared by an independent petroleum engineer acceptable to the Required Lenders (the “Independent Engineer”);

                           (l)          promptly upon the request of the Administrative Agent, such copies of all geological, engineering and related data contained in the Borrower’s files or readily accessible to the Borrower relating to its and its Subsidiaries’ Oil and Gas Properties as may reasonably be requested; and

                           (m)        such other information respecting the condition or operations, financial or otherwise, or properties or assets of the Borrower or any of its Subsidiaries as any Lender through the Administrative Agent may from time to time reasonably request in writing.

             SECTION 7.1.2              Compliance with Laws, etc.  The Borrower will, and will cause each of its Subsidiaries to, comply in all material respects with all applicable laws, rules, regulations and orders (including Environmental Laws), such compliance to include, without limitation, (a) the maintenance and preservation of its corporate, partnership or limited liability company existence and qualification as a foreign corporation, partnership or limited liability company; and (b) the payment, before the same become delinquent, of all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books.

             SECTION 7.1.3              Maintenance of Properties.  The Borrower will, and will cause each of its Subsidiaries to, maintain, preserve, protect and keep its properties in good repair, working order and condition in all material respects, and make necessary and proper repairs, renewals and replacements so that its business carried on in connection therewith may be properly conducted at all times unless the Borrower determines in good faith that the continued maintenance of any of its properties is no longer economical.

             SECTION 7.1.4              Use of Proceeds.  The proceeds of the Loans under Revolving Facility A and the proceeds of the Term Loans shall be used to refinance existing indebtedness of the Borrower under the Existing Credit Agreement and for general corporate purposes and working capital purposes of the Borrower and its Subsidiaries.  The proceeds of the Loans under Revolving Facility A, Revolving Facility B and the proceeds of the Term Loans may be used (i) to make the Intercompany Loan to MarkWest Canada Co. to be used to pay the cash portion of the purchase price for the Target Companies pursuant to the Acquisition Documents; (ii) to pay fees and expenses incurred in connection with the acquisitions under the Acquisition Documents; and (iii) to provide for working capital and other general corporate purposes of MarkWest Canada Co.

             SECTION 7.1.5              Insurance.  The Borrower will, and will cause each of its Subsidiaries to, maintain or cause to be maintained with responsible insurance companies insurance with respect to its properties and business (including business interruption insurance) against such casualties and contingencies and of such types and in such amounts as is customary in the case of similar businesses and which is satisfactory to the Administrative Agent and the Required Lenders and will (i) furnish to the Administrative Agent on each anniversary of the Effective Date a certificate or certificates of insurance from Borrower’s insurance companies evidencing the existence of all insurance required to be maintained by the Borrower by this Agreement and the other Loan Documents and that Administrative Agent is listed as additional insured and sole loss payee and (ii) upon request of the Administrative Agent, furnish to each Lender at reasonable intervals a certificate of an Authorized Officer of the Borrower setting forth the nature and extent of all insurance maintained by the Borrower and its Subsidiaries in accordance with this Section.

                           Except as the Administrative Agent may otherwise consent to in writing, Borrower will, and will cause each of its Subsidiaries to, forthwith upon receipt, transmit and deliver to the Administrative Agent, in the form received, all cash, checks, drafts, chattel paper and other instruments or writings for the payment of money (properly endorsed, where required, so that such items may be collected by the Administrative Agent) which may be received by the Borrower at any time in full or partial payment of amounts due under any insurance policy.  Except as the Administrative Agent may otherwise consent in writing, any such items which may be received by the Borrower will not be commingled with any other of its funds or property, but will be held separate and apart from its own funds or property and upon express trust for the Administrative Agent until delivery is made to the Administrative Agent.  Borrower will comply with the terms and conditions of any consent given by the Administrative Agent pursuant to the provisions of this paragraph.

                           All items or amounts which are delivered by the Borrower or by any insurance company to the Administrative Agent on account of partial or full payment of amounts due under any insurance policy shall be deposited to the credit of a deposit account (herein called the “Insurance Deposit Account”) of the Borrower with the Administrative Agent, as security for payment of the Obligations.  Borrower shall have no right to withdraw any funds deposited in the Insurance Deposit Account.  Administrative Agent will apply all or any of the then balance in the Insurance Deposit Account toward payment of the Obligations, in such order of application as the Administrative Agent may determine.  Administrative Agent may, from time to time, in its reasonable discretion and with the consent of the Required Lenders, release all or any of such balance representing collected funds to the Borrower.  Administrative Agent is authorized to endorse, in the name of the Borrower, any item, howsoever received by the Administrative Agent, representing any payment under any insurance policy.

             SECTION 7.1.6              Books and Records.  The Borrower will, and will cause each of its Subsidiaries to, keep books and records which accurately reflect all of its business affairs and transactions and permit the Administrative Agent and each Lender or any of their respective representatives, at reasonable times and intervals, to visit all of its offices and properties, to discuss its financial matters with its officers and independent public accountant (and the Borrower hereby authorizes such independent public accountant to discuss the Borrower’s financial matters with each Lender or its representatives with a representative of the Borrower present) and to examine (and, at the expense of the Borrower, photocopy extracts from) any of its books or other corporate records.  The Borrower shall pay any fees of such independent public accountant incurred in connection with the Administrative Agent’s or any Lender’s exercise of its rights pursuant to this Section.

             SECTION 7.1.7              Environmental Covenant.  The Borrower will, and will cause each of its Subsidiaries to, (a) use and operate all of its facilities and properties in material compliance with all Environmental Laws, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in material compliance therewith, and handle all Hazardous Materials in material compliance with all applicable Environmental Laws; and (b) provide such information and certifications which the Administrative Agent may reasonably request from time to time to evidence compliance with this Section 7.1.7; provided that neither the Administrative Agent nor any Lender shall have any obligation to make any inquiries pursuant to this Section 7.1.7.

             SECTION 7.1.8              Further Assurances; Additional Collateral.  (a) The Borrower shall cause each Domestic Subsidiary, from time to time, to become an Obligor with respect to, and jointly and severally liable with all other Obligors for, all the Obligations under this Agreement and the Notes and the other Loan Documents by promptly executing and delivering to the Lenders a Guaranty substantially in the form of Exhibit G hereto, with appropriate insertions, and by causing such Domestic Subsidiary’s, as the case may be, capital stock, partnership, joint venture or membership interest to be pledged pursuant to a pledge agreement in form satisfactory to the Administrative Agent.

                           (b)        The Borrower shall and shall cause its Subsidiaries to take such actions and to execute and deliver such documents and instruments as the Administrative Agent shall require to ensure that the Administrative Agent on behalf of the Lenders shall, at all times, have received currently effective duly executed Loan Documents encumbering substantially all of the Borrower’s and its Domestic Subsidiaries’ assets, including (i) 100% of the stock or other equity interest in each Domestic Subsidiary, and 65% of the stock or other equity interest in each Foreign Subsidiary, (ii) 85% of the total value of all of the Borrower’s and its Domestic Subsidiaries’ Oil and Gas Properties evaluated in the most recent Reserve Report, and (iii) all of the Borrower’s and its Domestic Subsidiaries’ other material assets and properties, both tangible and intangible, both personal and real, other than assets encumbered by Liens permitted by Section 7.2.3(q) , (r) and (s).

                           (c)         (i)          In connection with the actions required pursuant to the foregoing subsections (a) and (b), the Borrower shall and shall cause its Subsidiaries to execute and deliver such stock certificates, blank stock powers, evidence of corporate authorization, opinions of counsel, current valuations, evidence of title, title opinions, title insurance and other documents, and shall use commercially reasonable efforts to obtain landlord and mortgagee waivers and third party consents, as shall be requested by the Administrative Agent, in each case in form and substance satisfactory to the Administrative Agent.

                                        (ii)         On or before the delivery of each Reserve Report required by Section 7.1.1(k), the Borrower shall deliver to the Administrative Agent such title information as the Administrative Agent may require setting forth the status of title acceptable to the Administrative Agent covering enough of the Oil and Gas Properties included in such Reserve Report so that the Administrative Agent shall have received, together with the title information previously delivered to the Administrative Agent, satisfactory title information on at least 85% of the value of the Company’s and its Subsidiaries’ Oil and Gas Properties included in such Reserve Reports.

                           (d)        The liens required by this Section 7.1.7 shall be first priority perfected liens in favor of the Administrative Agent, subject to no other liens except Permitted Liens.  If the Administrative Agent shall determine that, as of any date, the Borrower shall have failed to comply with this Section 7.1.7, the Administrative Agent may (and at the direction of the Required Lenders, shall) notify the Borrower in writing of such failure and, within 30 days from and after receipt of such written notice by the Borrower, the Borrower shall execute and deliver to the Administrative Agent supplemental or additional Loan Documents, in form and substance satisfactory to the Administrative Agent and its counsel, securing payment of the Notes and the other Obligations and covering additional assets and properties not then encumbered by any Loan Documents (together with such current valuations, engineering reports, appraisals, and title opinions or insurance applicable to the additional assets and properties collaterally assigned, as may be requested by the Administrative Agent, each of which shall be in form and substance satisfactory to the Administrative Agent) such that the Administrative Agent shall have received currently effective duly executed and perfected Collateral Documents encumbering substantially all of the material assets and properties of the Borrower and its Domestic Subsidiaries as required by Section 7.1.8(b).

             SECTION 7.1.9              Compliance with Hedging Policy; Hedging Agreements.  (a) Attached hereto as Exhibit I is a copy of the Borrower’s hedging policy (the “Hedging Policy”).  Borrower shall at all times comply in all material respects with, and perform any and all obligations and actions set forth in, the terms and provisions of the Hedging Policy.  No changes shall be made to the Hedging Policy except in compliance with Section 7.2.1.

                           (b)        Within five (5) Business Days after the Effective Date, the Borrower shall enter into commodity price protection agreements containing terms, and with counterparties, satisfactory to the Administrative Agent, covering volumes of not less than 70% of the reasonably estimated projected production of the Borrower’s and its Subsidiaries’ Canadian Oil and Gas Properties, as determined by reference to the Initial Reserve Reports, during the period from the Effective Date and ending on December 31, 2004.  The Borrower shall maintain the hedged position required by this Section 7.1.9(b) during the period and in accordance with the terms specified herein.

             SECTION 7.1.10            Hedging Agreements.  Borrower shall, and shall cause each of its Subsidiaries to, (i) as soon as available and in any event within (A) 30 days after the end of each month (other than December), and (B) within 45 days after the end of each December, deliver to the Administrative Agent a summary of all existing Hedging Agreement entered into by Borrower or any of its Subsidiaries, including, without limitation, the amount of the Hedging Obligation, the quantity of hedged volumes and the hedged price relating to each such Hedging Agreement, and the Counterparty for each such Hedging Agreement, and (ii) at the request of the Administrative Agent, provide the Administrative Agent with a copy of such Hedging Agreement, any related confirmations and/or any similar documentation for each such Hedging Agreement.

             SECTION 7.1.11            Performance of Obligations.  The Borrower shall (and shall cause its Subsidiaries to, comply in all material respects with all of its (and their) obligations under all material contracts including, but not limited to, contracts relating to the properties of the Borrower or its Subsidiaries or by which the Borrower (or such Subsidiaries, as applicable) are bound.

             SECTION 7.1.12            Payment of Taxes and Claims.  The Borrower will and will cause each of its Subsidiaries to file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Borrower or any Subsidiary, provided that neither the Borrower nor any Subsidiary need pay any such tax or assessment or claims if (i) the amount, applicability or validity thereof is contested by the Borrower or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Borrower or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Borrower or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect.

             SECTION 7.1.13            ERISA Information and Compliance.  The Borrower will promptly furnish and will cause the Subsidiaries and any ERISA Affiliate to promptly furnish to the Administrative Agent (i) promptly after the filing thereof with the United States Secretary of Labor, the Internal Revenue Service or the PBGC, copies of each annual and other report with respect to each Plan or any trust created thereunder, (ii) immediately upon becoming aware of the occurrence of any ERISA Event or of any “prohibited transaction,” as described in section 406 of ERISA or in section 4975 of the Code, in connection with any Plan or any trust created thereunder, a written notice signed by a Authorized Officer specifying the nature thereof, what action the Borrower, the Subsidiary or the ERISA Affiliate is taking or proposes to take with respect thereto, and, when known, any action taken or proposed by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto, and (iii) immediately upon receipt thereof, copies of any notice of the PBGC’s intention to terminate or to have a trustee appointed to administer any Plan.  With respect to each Plan (other than a Multiemployer Plan), the Borrower will, and will cause each Subsidiary and ERISA Affiliate to, (i) satisfy in full and in a timely manner, without incurring any late payment or underpayment charge or penalty and without giving rise to any lien, all of the contribution and funding requirements of section 412 of the Code (determined without regard to sections 303, 304 and 306 of ERISA), and (ii) pay, or cause to be paid, to the PBGC in a timely manner, without incurring any late payment or underpayment charge or penalty, all premiums required pursuant to sections 4006 and 4007 of ERISA.

             SECTION 7.1.14            Merger into MarkWest Canada Co.  Immediately after the Effective Date the Borrower shall cause the Target Companies to be merged into MarkWest Canada Co.

             SECTION 7.1.15            Certain Collateral Agreements.  The Borrower shall deliver the Post-Closing Security Documents, properly executed by all parties thereto, promptly upon request by the Administrative Agent, and in any event not later than sixty (60) days after the date of execution of this Agreement, together with such other documents, instruments, title reports and other information of the type described in Section 7.1.8 as the Administrative Agent may request.

             SECTION 7.2   Negative Covenants.  The Borrower agrees with the Administrative Agent and each Lender that, until all Commitments have terminated and all Obligations have been paid and performed in full, the Borrower will perform the obligations set forth in this Section 7.2.

             SECTION 7.2.1              Business Activities.  The Borrower will not, and will not permit any of its Subsidiaries to, engage in any business activity, except those described in the first recital and such activities as may be incidental or related thereto; provided that prior to making any material change after the date hereof in the Borrower’s natural gas, natural gas liquids and crude oil marketing business or Hedging Policy (including any net open position), the Borrower will give ten (10) Business Days advance notice to Administrative Agent and the Lenders.

             SECTION 7.2.2              Indebtedness.  The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist or otherwise become or be liable in respect of any Indebtedness, other than, without duplication, the following: (a) Indebtedness in respect of the Loans and other Obligations; (b) Indebtedness under a Canadian Credit Facility; (c) [intentionally omitted] (d) unsecured Indebtedness incurred in the ordinary course of business consisting of open accounts extended by suppliers and customers on normal trade terms in connection with purchases or sales of goods and services, but excluding Indebtedness incurred through the borrowing of money or Contingent Liabilities; (e) (i) at any time that a Canadian Facility is not in place, other Indebtedness of the Borrower and its Domestic Subsidiaries in an aggregate amount not to exceed $10,000,000, and (ii) at any time that a Canadian Facility is in place, (A)  Indebtedness of the Borrower’s Canadian Subsidiaries in an aggregate principal amount not greater than the Canadian Ratio times $10,000,000, and (B) Indebtedness of the Borrower and its Domestic Subsidiaries which, when aggregated with the principal amount of Indebtedness outstanding pursuant to the preceding clause (A), does not exceed $10,000,000 at any time outstanding; (f) Indebtedness by a Subsidiary to the Borrower or to another Subsidiary provided such Indebtedness is evidenced by a promissory note; (g) Indebtedness resulting from any Hedging Obligations; (h) Indebtedness arising in respect of the West Shore/Basin Purchase Agreement; and (i) payments pursuant to the Incentive Payments Agreement; provided, however, notwithstanding the foregoing, that the Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or otherwise become or be liable in respect of any additional Indebtedness otherwise permitted by clauses (e) or (i) if, after giving effect to the incurrence thereof, any Default shall have occurred and be continuing.

             SECTION 7.2.3              Liens.  The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets, whether now owned or hereafter acquired, except the following (“Permitted Liens”):

                           (a)         Liens in existence on the date hereof listed on the Disclosure Schedule, provided that no such Lien shall be extended to cover any additional property after the date of this Agreement and that the amount of Indebtedness secured thereby is not increased;

                           (b)        Liens securing payment of the Obligations, granted pursuant to any Loan Document;

                           (c)         Liens securing a Canadian Credit Facility, subject to execution of an intercreditor agreement among such lenders and the Lenders hereunder (an “Intercreditor Agreement”);

                           (d)        Liens in favor of a Lender or an Affiliate of Lender on assets of Canadian Subsidiaries of the Borrower securing Lender Hedging Agreements to which a Canadian Subsidiary of the Borrower is a party, which Liens shall be, after a Canadian Credit Facility is put in place, subject to the Intercreditor Agreement;

                           (e)         Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;

                           (f)         Liens of carriers, warehousemen, mechanics, materialmen, landlords and other similar statutory or equitable Liens incurred in the ordinary course of business for sums not overdue or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;

                           (g)        Liens incurred in the ordinary course of business in connection with workmen’s compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, leases and contracts (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds, in each case as such Liens arise in the ordinary cause of business and in each case provided that the obligations secured thereby are not at the time delinquent or thereafter payable without penalty or being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;

                           (h)        judgment Liens which do not constitute an Event of Default that are in existence less than 30 days after the entry thereof or with respect to which execution has been stayed or the payment of which is covered in full (subject to a customary deductible) by insurance maintained with responsible insurance companies;

                           (i)          hydrocarbon or natural gas sales contracts liens reserved in customary oil and gas leases for bonus or rental payments, royalties, overriding royalties and joint operating agreements, provided that such Liens secure claims which either are not delinquent or are being contested in good faith by the Borrower or a Subsidiary by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;

                           (j)          covenants, restrictions, easements, servitudes, permits, conditions, exceptions, reservations, minor rights, minor encumbrances, minor irregularities in title or conventional rights of reassignment prior to abandonment which do not materially interfere with the occupation, use and enjoyment by the Borrower or any of its Subsidiaries of its respective assets in the ordinary course of business as presently conducted, or materially impair the value thereof for the purpose of such business;

                           (k)         Liens reserved in or exercisable under any lease or sublease to which any Borrower or Subsidiary is a lessee which secure the payment of rent or compliance with the terms of such lease or sublease; provided that the rent under such lease or sublease is not then overdue and the Borrower or Subsidiary is in material compliance with the terms and conditions thereof;

                           (l)          Liens in favor of any Person (other than the Borrower or any Affiliate of the Borrower) under any pooling, unit, development, farmout, participation, overriding royalty, net profits interest, carried interest, reversionary interest, operating agreement or similar agreement affecting the property which is the subject of such agreement, provided that (i) such agreement is entered into in the ordinary course of business in accordance with standard industry practice, (ii) such Liens have not become subject to enforcement proceeding that have not been dismissed or stayed or (iii) the obligations secured thereby are not overdue, or if overdue, are being contested by the Borrower or Subsidiary diligently and in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;

                           (m)        Liens incurred or created in the ordinary course of business and in accordance with customary oil and gas industry practice as security in favor of a Person (other than the Borrower or any Affiliate of the Borrower) conducting the development or operation of any Oil and Gas Properties or to secure Borrower’s or any Subsidiary’s proportionate share of costs and expenses of such development or operations, which amounts are not overdue, or if overdue, are being contested by the Borrower or Subsidiary diligently and in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books;

                           (n)        Liens on Oil and Gas or the proceeds of Oil and Gas pursuant to a processing or transmission arrangement, with a Person other than the Borrower or an Affiliate of the Borrower, entered into or assumed by the Borrower or a Subsidiary in the ordinary course of its business, securing the payment of its obligations in respect of the fees, costs and expenses attributable to the processing or transmission (as the case may be) of any such Oil and Gas under any agreement or arrangement; provided that the obligations secured thereby are not overdue, are being contested by the Borrower or Subsidiary diligently and in good faith by appropriate proceedings; and for which adequate reserves in accordance with GAAP shall have been set aside on its books;

                           (o)        any interest or title of a lessor under any lease entered into by the Borrower or any Subsidiary in the ordinary course of its business and covering only the assets so leased;

                           (p)        Liens incurred in the ordinary course of business in connection with margin requirements under Hedging Agreements not to exceed in the aggregate $8,500,000 at any time outstanding;

                           (q)        Liens securing Capitalized Lease Obligations provided that such Capitalized Lease Obligations are permitted under Section 7.2.2(e);

                           (r)         Purchase money Liens upon or in any property acquired by Borrower or any of its Subsidiaries to secure the deferred portion of the purchase price of such property or to secure Indebtedness incurred to finance the acquisition of such property, provided that (i) no such Lien shall be extended to cover property other than the property being acquired, and (ii) the Indebtedness thereby secured is permitted by Section 7.2.2(e); and

                           (s)         any Lien existing on any asset (other than stock of a Subsidiary) prior to acquisition thereof by the Borrower or a Subsidiary, and not created in contemplation of such acquisition, provided that (i) no such Lien shall be extended to cover property other than the asset being acquired, (ii) such Lien was not created in contemplation of or in connection with such acquisition, (iii) the Indebtedness thereby secured is permitted by Section 7.2.2(e), and (iv) the fair market value of such asset shall at no time exceed 150% of the Indebtedness thereby secured.

             SECTION 7.2.4              Financial Covenants.  The Borrower will not permit:

                           (a)         As of the end of any calendar month, its Tangible Net Worth to be less than $51,800,000 plus 50% of Consolidated Net Income of the Borrower and its Subsidiaries, if positive, for the period from July 1, 2001 through such month-end date plus 75% of the aggregate increases in shareholders’ equity (determined in accordance with GAAP) of the Borrower and its subsidiaries after Closing by reason of the issuance and sale of capital stock of the Borrower (including the conversion of any debt securities of the Borrower into capital stock).

                           (b)        Its Current Ratio to be less than 1:1 as of the end of any calendar month.

                           (c)         Its Leverage Ratio to be greater than the amounts set forth below as of the last day of each month ending during the following periods:

Maximum Leverage Ratio	As of the Last Date of each Month Ending During the Period Set Forth Below
3.75	Closing through 12/31/01
3.50	1/31/02 through 3/31/02
3.25	4/30/02 through 6/30/02
3.00	7/31/02 and thereafter

                           (d)        Its Fixed Charge Coverage Ratio to be less than the amounts set forth below as of the last day of each month ending during the following periods:

Minimum Fixed Charge Coverage Ratio	As of the Last Date of each Month Ending During the Period Set Forth Below
1.50	Closing - 3/31/02
1.75	4/30/02 - 3/31/03
2.00	4/30/03 - 3/31/04
2.25	4/30/04 and thereafter

             SECTION 7.2.5              Investments.  (a) The Borrower will not, and will not permit any of its Subsidiaries to, make, incur, assume or suffer to exist any Investment in any other Person, except: (i) Investments existing on the Effective Date and identified in Item 7.2.5(a) (“Ongoing Investments”) of the Disclosure Schedule; (ii) Cash Equivalent Investments; (iii) without duplication, Investments permitted as Indebtedness pursuant to Section 7.2.2; (iv) Investments permitted by Section 7.2.8; (v) in the ordinary course of business, Investments by the Borrower or any of its Subsidiaries in any Subsidiaries, by way of contributions to capital or loans or advances; or (vi) Investments incurred in order to consummate Acquisitions otherwise permitted herein, provided that such Acquisition shall have been approved or consented to by the board of directors or similar governing entity of the Person being acquired; and (vii) acquisition of not more than 5% of the outstanding equity securities of any Person (other than the Borrower); provided, however, that (A) any Investment which when made complies with the requirements of the definition of the term “Cash Equivalent Investment” may continue to be held notwithstanding that such Investment if made thereafter would not comply with such requirements; (B) no Investment otherwise permitted by clause (vii) shall be permitted to be made if, immediately before or after giving effect thereto, any Default shall have occurred and be continuing; (C) any Investment otherwise permitted by clauses (iv), (v), (vi) or (vii) in an entity engaged in or to be engaged in the natural gas, natural gas liquids or crude oil or other energy marketing business shall be structured in a manner acceptable to the Required Lenders; and (D) Investments made after the consummation of the Canadian Acquisition in Foreign Subsidiaries or in assets located outside the United States shall not exceed an aggregate amount equal to ten percent (10%) of the Borrower’s consolidated assets at the time that the Investment is made.

             SECTION 7.2.6              Restricted Payments, etc.  On and at all times after the Effective Date, (a) the Borrower will not declare, pay or make any dividend or distribution (in cash, property or obligations) on any shares of any class of capital stock (now or hereafter outstanding) of the Borrower or on any warrants, options or other rights with respect to any shares of any class of capital stock (now or hereafter outstanding) of the Borrower (other than dividends or distributions payable in its common stock or warrants to purchase its common stock or splitups or reclassifications of its stock into additional or other shares of its common stock) or apply, or permit any of its Subsidiaries to apply, any of its funds, property or assets to the purchase, redemption, sinking fund or other retirement of, or agree or permit any of its Subsidiaries to purchase or redeem, any shares of any class of capital stock (now or hereafter outstanding) of the Borrower, or warrants, options or other rights with respect to any shares of any class of capital stock (now or hereafter outstanding) of the Borrower if the aggregate amount of such dividends, distributions and applications for the current and the preceding three Fiscal Quarters exceeds the lesser of (i) 50% of consolidated net income of the Borrower and its Subsidiaries for the current and the preceding three Fiscal Quarters or (ii) $2,000,000, provided, however, that, notwithstanding the foregoing and only with respect to activities required or permitted under the MarkWest 401(k) Plan, Borrower shall be permitted to purchase or redeem up to $1 million in the aggregate per annum of shares of any class of capital stock (now or hereafter outstanding) of the Borrower on the open-market or held in Borrower’s 401(k), and (b) the Borrower will not, and will not permit any Subsidiary to, make any deposit for any purchase, redemption, distribution or other payment that would be prohibited by this Section.  This Section shall not be construed so as to prohibit MarkWest Canada Co. from making payments under the Incentive Payments Agreement.

             SECTION 7.2.7              Rental Obligations.  The Borrower will not, and will not permit any of its Subsidiaries to, enter into at any time any arrangement (excluding oil and gas leases entered into in the ordinary course of business and arrangements which create Capitalized Lease Liabilities permitted under Section 7.2.2) which involves the leasing by the Borrower or any of its Subsidiaries from any lessor of any real or personal property (or any interest therein), including, without limitation, pursuant to any sale-leaseback transaction, except arrangements which, together with all other such arrangements which shall then be in effect, will not require the payment of an aggregate amount of rentals by the Borrower and its Subsidiaries in excess of (excluding escalations resulting from a rise in the consumer price or similar index) $15,000,000 during the full remaining term of such arrangements; provided, however, that any calculation made for purposes of this Section for any period shall exclude any payments relating to office rentals arising in connection with the Borrower’s sale of the building located at 155 Inverness in Englewood, Colorado which do not exceed the sum of (i) $540,000 per Fiscal Year plus the Borrower’s pro rata share of the amount of the increase in the “operating expenses” for each Fiscal Year as set forth in the applicable lease; and provided further that any calculation made for purposes of this Section shall exclude any amounts required to be expended for maintenance and repairs, insurance, taxes, assessments, and other similar charges.

             SECTION 7.2.8              Consolidation, Merger, etc.  The Borrower will not, and will not permit any of its Subsidiaries to, liquidate or dissolve, consolidate with, or merge into or with, any other corporation, or purchase or otherwise acquire all or substantially all of the assets of any Person (or of any division thereof) except (a) any such Subsidiary may liquidate or dissolve voluntarily into, and may merge with and into, the Borrower or any other Subsidiary, provided that if the Borrower is a party to a merger, the Borrower is the surviving entity, and the assets or stock of any Subsidiary may be purchased or otherwise acquired by the Borrower or any other Subsidiary; and (b) so long as no Default has occurred and is continuing or would occur after giving effect thereto, in connection with Investments permitted by Section 7.2.5, the Borrower or any of its Subsidiaries may purchase all or substantially all of the assets of any Person, or acquire such Person by merger, if the Borrower (if a party to such merger) or such Subsidiary (if the Borrower is not a party to such merger) is the survivor of such merger.

             SECTION 7.2.9              Asset Dispositions, etc.  (a) The Borrower will not, and will not permit any of its Subsidiaries to, sell, transfer, lease, contribute or otherwise convey, or grant options, warrants or other rights with respect to, all or any substantial part of its assets (including capital stock of Subsidiaries) to any Person.

                           (b)        The Borrower will not, and will not permit any of its Subsidiaries to, sell, convey, contribute or transfer any asset (including, without limitation, any sale or assignment with or without recourse of any receivable) except:  (i) retirement of assets in the ordinary course of business; (ii) the sale, conveyance, contribution or transfer of any asset or assets having a fair market value at the time of sale, conveyance, contribution or transfer of $10,000,000 or less in the aggregate for all such sales, conveyances, contributions and transfers in any calendar year; (iii) the sale of Oil and Gas production and inventory in the ordinary course of business, including in connection with hedge agreements or pursuant to long-term contracts; (iv) any conveyance or transfer by a Subsidiary of the Borrower to the Borrower, or by a Subsidiary of the Borrower to a wholly owned Subsidiary of Borrower; (v) transfers by the Borrower to a Subsidiary permitted by Section 7.2.5; and (vi) transfers of Hydrocarbon Interests which transfers constitute payments in kind pursuant to the Incentive Payments Agreement.  The foregoing notwithstanding, the Borrower shall not, nor shall the Borrower permit any of its Subsidiaries to, transfer any assets, other than the sale of Oil and Gas production and inventory and payment of trade payables in the ordinary course of business pursuant to Section 7.2.9(b)(iii), to any Person pursuant to this Section 7.2.9 if a Default shall have occurred and be continuing or would otherwise be existing after, or result from, any such transfer.

             SECTION 7.2.10            Subordinated Debt Documents.  The Borrower will not, and will not permit any of its Subsidiaries to, amend any Subordinated Debt Document unless approved in writing by the Required Lenders (other than ministerial amendments and amendments to extend the time or times for payment).  The Borrower shall not make any payments of interest or any other amounts in respect of the Subordinated Debt if a Default shall have occurred and be continuing or would result from such payment.  The Borrower will not prepay any principal, interest or other indebtedness in respect of Subordinated Debt, or make any redemption or acquisition for value or defeasance, refinancing or exchange (other than for PIK Notes) thereof or therefor, or make any payments in contravention of the Subordination Agreement.  Any PIK Notes shall have the same terms as the related Subordinated Notes, except as otherwise approved by the Required Lenders, and shall be considered Subordinated Notes for purposes of this Agreement and the Subordination Agreement.

             SECTION 7.2.11            Transactions with Affiliates.  The Borrower will not, and will not permit any of its Subsidiaries to, enter into, or cause, suffer or permit to exist any arrangement or contract with any of its other Affiliates unless such arrangement or contract is fair and equitable to the Borrower or such Subsidiary and is an arrangement or contract of the kind which would be entered into by a prudent Person in the position of the Borrower or such Subsidiary with a Person which is not one of its Affiliates.

             SECTION 7.2.12            Negative Pledges, Restrictive Agreements, etc.  (a) The Borrower will not, and will not permit any of its Subsidiaries to, enter into any agreement (excluding this Agreement, any other Loan Document and the documents governing the Canadian Credit Facility) prohibiting or restricting the creation or assumption of any Lien upon its properties, revenues or assets, whether now owned or hereafter acquired, or the ability of the Borrower or any other Obligor to amend or otherwise modify this Agreement or any other Loan Document or  the ability of any Subsidiary to make any payments, directly or indirectly, to the Borrower by way of dividends, advances, repayments of loans or advances, reimbursements of management and other intercompany charges, expenses and accruals or other returns on investments, or any other agreement or arrangement which restricts the ability of any such Subsidiary to make any payment, directly or indirectly, to the Borrower.  Notwithstanding the foregoing, (i) documents governing a Capitalized Lease Liability or a purchase money Lien permitted by Section 7.2.3(q) and (r) may prohibit other Liens on the asset encumbered by such Lien, and (ii) the Lenders acknowledge that certain real estate leases entered into by Borrower or its Subsidiaries prior to the Effective Date restrict or prohibit Liens on the Borrower’s or its Subsidiary’s leasehold interest.

                           (b)        The Borrower will not, and will not permit any of its Subsidiaries to, enter into any agreement governing Indebtedness if such agreement contains covenants or events of default that are more restrictive than those contained in this Agreement; provided, however, that the foregoing restriction shall not apply to the documents governing the Canadian Credit Facility.

             SECTION 7.2.13            Amendments to Incentive Payments Agreement.  The Borrower will not amend or permit any amendment to the Incentive Payments Agreement or any other agreement which would have the effect of increasing the amount of any Incentive Payments or making such amounts due sooner, or which could otherwise have an adverse effect on the Lenders’ interests hereunder.  The Borrower will not permit any of its Subsidiaries to make any payments (either in cash or in kind) under the Incentive Payments Agreement after the occurrence of and during the continuation of any Default hereunder.

             SECTION 7.2.14            Use of Proceeds.  No proceeds of any Loan will be used to acquire any equity security of a class which is registered pursuant to Section 12 of the Securities Exchange Act of 1934 or any “margin stock”, as defined in Regulation U except in connection with transactions (i) authorized by the board of directors of the Borrower, (ii) either (A) authorized by the board of directors or other governing body of the Person which stock is being acquired or (B) involving less than 5% of the stock of any Person (except the Borrower) and (iii) which would not cause the Borrower to fail to be in compliance with Section 6.17 and which would not cause the Loans or the Lenders to be in violation of Regulation U.

ARTICLE VIII
EVENTS OF DEFAULT

             SECTION 8.1   Listing of Events of Default.  Each of the following events or occurrences described in this Section 8.1 shall constitute an “Event of Default”.

             SECTION 8.1.1              Non-Payment of Obligations.  The Borrower shall default in the payment or prepayment when due of any principal of or interest on any Loan, or the Borrower shall default (and such default shall continue unremedied for a period of five days) in the payment when due of any Commitment Fee or of any other Obligation.

             SECTION 8.1.2              Breach of Warranty.  Any representation or warranty of the Borrower or any other Obligor made or deemed to be made hereunder or in any other Loan Document executed by it or any other writing or certificate furnished by or on behalf of the Borrower or any other Obligor to the Administrative Agent or any Lender for the purposes of or in connection with this Agreement or any such other Loan Document (including any certificates delivered pursuant to Article V) is or shall be incorrect when made in any material respect.

             SECTION 8.1.3              Non-Performance of Certain Covenants and Obligations.  The Borrower shall default in the due performance and observance of any of its obligations under Section 7.1.1(d) or Section 7.2 which default continues unremedied for 10 days.

             SECTION 8.1.4              Non-Performance of Other Covenants and Obligations.  Any Obligor shall default in the due performance and observance of any other agreement contained herein or in any other Loan Document executed by it, and such default shall continue unremedied for a period of 30 days after notice thereof shall have been given to the Borrower by the Administrative Agent or any Lender.

             SECTION 8.1.5              Default under Subordinated Note Documents or on Other Indebtedness.  (a) The Borrower or any of its Subsidiaries (i) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) in respect of any Indebtedness (other than Indebtedness  hereunder) having an aggregate principal amount (including undrawn committed or available amounts and including amounts owing to all creditors under any combined or syndicated credit arrangement) of more than $3,500,000, or (ii) fails to observe or perform any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such Indebtedness or a trustee or agent on behalf of such holder or holders to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased or redeemed (automatically or otherwise) prior to its stated maturity; or (b) an Event of Default occurs as defined in the Canadian Facility.

             SECTION 8.1.6              Judgments.

                           (a)         Any final judgment or order for the payment of money in excess of $3,500,000 shall be rendered against the Borrower or any of its Subsidiaries and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or (ii) there shall be any period of 15 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect.

                           (b)        Any non-monetary final judgment shall be rendered that has, or would reasonably be expected to have, a Material Adverse Effect and, in either case, (i) enforcement proceedings are commenced by any creditor upon such judgment or order, or (ii) there is a period of 15 consecutive days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect.

             SECTION 8.1.7              Pension Plans.  Any of the following events shall occur with respect to any Pension Plan (a) the institution of any steps by the Borrower, any member of its Controlled Group or any other Person to terminate a Pension Plan if, as a result of such termination, the Borrower or any such member could be required to make a contribution to such Pension Plan, or could reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $3,500,000; or (b) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under section 302(f) of ERISA.

             SECTION 8.1.8              Control of the Borrower.  Any Change in Control shall occur.

             SECTION 8.1.9              Bankruptcy, Insolvency, etc.  The Borrower or any of its Subsidiaries shall (a) become insolvent or generally fail to pay, or admit in writing its inability or unwillingness to pay, debts as they become due; (b) apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for the Borrower or any of its Subsidiaries or any property of any thereof, or make a general assignment for the benefit of creditors; (c) in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for the Borrower or any of its Subsidiaries or for a substantial part of the property of any thereof, and such trustee, receiver, sequestrator or other custodian shall not be discharged within 60 days, provided that the Borrower, each Subsidiary hereby expressly authorizes the Administrative Agent and each Lender to appear in any court conducting any relevant proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; (d) permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Borrower or any of its Subsidiaries or any other Obligor, and, if any such case or proceeding is not commenced by the Borrower or such Subsidiary, such case or proceeding shall be consented to or acquiesced in by the Borrower or such Subsidiary or shall result in the entry of an order for relief or shall remain for 60 days undismissed, provided that the Borrower, each Subsidiary hereby expressly authorizes the Administrative Agent and each Lender to appear in any court conducting any such case or proceeding during such 60-day period to preserve, protect and defend their rights under the Loan Documents; or (e) take any corporate or partnership action authorizing, or in furtherance of, any of the foregoing.

             SECTION 8.1.10            Impairment of Security, etc.  Except as a direct result of the acts or omissions of the Administrative Agent or any Lender, any Loan Document, or any Lien granted thereunder, shall (except in accordance with its terms), in whole or in part, terminate, cease to be effective or cease to be the legally valid, binding and enforceable obligation of any Obligor party thereto; the Borrower, any other Obligor or any other party shall, directly or indirectly, contest in any manner such effectiveness, validity, binding nature or enforceability; or for a period of ten days following the earlier of the date the Borrower has knowledge thereof or the Borrower receives notice from the Administrative Agent or any Lender thereof, any Lien securing any Obligation shall, in whole or in part, cease to be a perfected first priority Lien, subject only to those exceptions expressly permitted by such Loan Document.

             SECTION 8.1.11            Default Under Material Agreement.  The Borrower or any of its Subsidiaries shall default in or breach the performance or observance of any provision of any material contract or agreement to which it is a party or it or its property is bound if such default or breach could result in the opinion of the Administrative Agent and the Required Lenders in a Material Adverse Effect and if such default or breach is not cured within 30 days of the Borrower’s knowledge of such breach or default.

             SECTION 8.1.12            Invalidity of Loan Documents.  Any Loan Document, at any time after its execution and delivery and for any reason other than the agreement of the requisite percentage of Lenders or satisfaction in full of all the Obligations, ceases to be in full force and effect, or is declared by a court of competent jurisdiction to be null and void, invalid or unenforceable in any respect; or any Obligor denies that it has any or further liability or obligation under any Loan Document, or purports to revoke, terminate, rescind or invalidate any Loan Document in whole or in part.

             SECTION 8.2   Action if Bankruptcy.  If any Event of Default described in clauses (a) through (d) of Section 8.1.9 shall occur with respect to the Borrower or any Obligor, the Commitments (if not theretofore terminated) shall automatically terminate and the outstanding principal amount of all outstanding Loans and all other Obligations shall automatically be and become immediately due and payable, without presentment, demand, protest, notice of intent to accelerate, notice of acceleration, notice of any other kind or demand.

             SECTION 8.3   Action if Other Event of Default.  If any Event of Default (other than any Event of Default described in clauses (a) through (d) of Section 8.1.9 with respect to the Borrower or any other Obligor) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Administrative Agent shall, upon the direction of, or may, with the consent of, the Required Lenders, by notice to the Borrower (a) declare all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable and/or the Commitments (if not theretofore terminated) to be terminated, whereupon the full unpaid amount of such Loans and other Obligations which shall be so declared due and payable shall be and become immediately due and payable, without notice of intent to accelerate, notice of acceleration, notice of any other kind, protest, demand or presentment, and/or, as the case may be, the Commitments shall terminate; (b) require that the Borrower Cash Collateralize its Obligations in respect of Letters of Credit in an amount equal to 110% of the then aggregate Stated Amount of all Letters of Credit outstanding and undrawn; and (c) exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable law.

ARTICLE IX
THE AGENT

             SECTION 9.1   Actions.  Each Lender hereby appoints BofA as its Administrative Agent and Collateral Agent under and for purposes of this Agreement, the Notes and each other Loan Document.  Each Lender authorizes the Administrative Agent to act on behalf of such Lender under this Agreement, the Notes and each other Loan Document and, in the absence of other written instructions from the Required Lenders received from time to time by the Administrative Agent (with respect to which the Administrative Agent agrees that it will comply, except as otherwise provided in this Section or as otherwise advised by counsel), to exercise such powers hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof, together with such powers as may be reasonably incidental thereto.  Each Lender hereby indemnifies (which indemnity shall survive any termination of this Agreement) the Administrative Agent, pro rata according to such Lender’s Percentage, from and against any and all liabilities, obligations, losses, damages, claims, costs or expenses of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against, the Administrative Agent in any way relating to or arising out of this Agreement, the Notes and any other Loan Document, including reasonable attorneys’ fees, and as to which the Administrative Agent is not reimbursed by the Borrower; whether or not arising out of the negligence of the Administrative Agent, provided, however, that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, claims, costs or expenses which are determined by a court of competent jurisdiction in a final proceeding to have resulted solely from the Administrative Agent’s gross negligence or wilful misconduct.  The Administrative Agent shall not be required to take any action hereunder, under the Notes or under any other Loan Document, or to prosecute or defend any suit in respect of this Agreement, the Notes or any other Loan Document, unless it is indemnified hereunder to its satisfaction.  If any indemnity in favor of the Administrative Agent shall be or become, in the Administrative Agent’s determination, inadequate, the Administrative Agent may call for additional indemnification from the Lenders and cease to do the acts indemnified against hereunder until such additional indemnity is given.

             SECTION 9.2   Funding Reliance, etc.  Unless the Administrative Agent shall have been notified by telephone, confirmed in writing, by any Lender by 10:30 p.m., Central time, on the day of a Borrowing that such Lender will not make available the amount which would constitute its Percentage of such Borrowing on the date specified therefor, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent and, in reliance upon such assumption, make available to the Borrower a corresponding amount.  If and to the extent that such Lender shall not have made such amount available to the Administrative Agent, such Lender and the Borrower severally agree to repay the Administrative Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date the Administrative Agent made such amount available to the Borrower to the date such amount is repaid to the Administrative Agent, at the Federal Funds Rate applicable at the time.

             SECTION 9.3   Exculpation.  Neither the Administrative Agent nor any of its directors, officers, employees or agents shall be liable to any Lender for any action taken or omitted to be taken by it under this Agreement or any other Loan Document, or in connection herewith or therewith, except for its own wilful misconduct or gross negligence, nor responsible for any recitals or warranties herein or therein, nor for the effectiveness, enforceability, validity or due execution of this Agreement or any other Loan Document, nor for the creation, perfection or priority of any Liens purported to be created by any of the Loan Documents, or the validity, genuineness, enforceability, existence, value or sufficiency of any collateral security, nor to make any inquiry respecting the performance by the Borrower of its obligations hereunder or under any other Loan Document.  Any such inquiry which may be made by the Administrative Agent shall not obligate it to make any further inquiry or to take any action.  The Administrative Agent shall be entitled to rely upon advice of counsel concerning legal matters and upon any notice, consent, certificate, statement or writing which the Administrative Agent believes to be genuine and to have been presented by a proper Person.

             SECTION 9.4   Successor.  The Administrative Agent may resign as such at any time upon at least 30 days’ prior notice to the Borrower and all Lenders.  If the Administrative Agent at any time shall resign, the Required Lenders may appoint another Lender as a successor Administrative Agent which shall thereupon become the Administrative Agent hereunder.  If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent’s giving notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be one of the Lenders or a commercial banking institution organized under the laws of the U.S. (or any State thereof) or a U.S. branch or agency of a commercial banking institution, and having a combined capital and surplus of at least $500,000,000.  Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall be entitled to receive from the retiring Administrative Agent such documents of transfer and assignment as such successor Administrative Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement.  After any retiring Administrative Agent’s resignation hereunder as the Administrative Agent, the provisions of (a) this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement; and (b) Section 10.3 and Section 10.4 shall continue to inure to its benefit.

             SECTION 9.5   Loans by BofA.  BofA shall have the same rights and powers with respect to (x) the Loans made by it or any of its Affiliates, and (y) the Notes held by it or any of its Affiliates as any other Lender and may exercise the same as if it were not the Administrative Agent.  BofA and its Affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate of the Borrower as if BofA were not the Administrative Agent hereunder.

             SECTION 9.6   Credit Decisions.  Each Lender acknowledges that it has, independently of the Administrative Agent and each other Lender, and based on such Lender’s review of the financial information of the Borrower, this Agreement, the other Loan Documents (the terms and provisions of which being satisfactory to such Lender) and such other documents, information and investigations as such Lender has deemed appropriate, made its own credit decision to extend its Commitments.  Each Lender also acknowledges that it will, independently of the Administrative Agent and each other Lender, and based on such other documents, information and investigations as it shall deem appropriate at any time, continue to make its own credit decisions as to exercising or not exercising from time to time any rights and privileges available to it under this Agreement or any other Loan Document.

             SECTION 9.7   Copies, etc.  The Administrative Agent shall give prompt notice to each Lender of each notice or request required or permitted to be given to the Administrative Agent by the Borrower pursuant to the terms of this Agreement (unless concurrently delivered to the Lenders by the Borrower).  The Administrative Agent will distribute to each Lender each document or instrument received for its account and copies of all other communications received by the Administrative Agent from the Borrower for distribution to the Lenders by the Administrative Agent in accordance with the terms of this Agreement.

             SECTION 9.8   Default; Collateral.

                           (a)         Upon the occurrence and continuance of a Default, the Lenders agree to promptly confer in order that Required Lenders or the Lenders, as the case may be, may agree upon a course of action for the enforcement of the rights of the Lenders; and the Administrative Agent shall be entitled to refrain from taking any action (without incurring any liability to any Person for so refraining) unless and until the Administrative Agent shall have received instructions from Required Lenders.   All rights of action under the Loan Documents and all right to the Collateral, if any, hereunder may be enforced by the Administrative Agent and any suit or proceeding instituted by the Administrative Agent in furtherance of such enforcement shall be brought in its name as the Administrative Agent without the necessity of joining as plaintiffs or defendants any other Lender, and the recovery of any judgment shall be for the benefit of the Lenders (and, with respect to Lender Hedging Agreements, Affiliates, if applicable) subject to the expenses of the Administrative Agent.  In actions with respect to any property of the Borrower or any other Obligor, the Administrative Agent is acting for the ratable benefit of each Lender (and, with respect to Lender Hedging Agreement, Affiliates, if applicable).  Any and all agreements to subordinate (whether made heretofore or hereafter) other indebtedness or obligations of Borrower to the Obligation shall be construed as being for the ratable benefit of each Lender (and, with respect to Lender Hedging Agreement, Affiliates, if applicable).

                           (b)        Each Lender authorizes and directs the Administrative Agent to enter into the Collateral Documents for the benefit of the Lenders (and, with respect to Lender Hedging Agreement, Affiliates, if applicable).  Except to the extent unanimity (or other percentage set forth in Section 10.1) is required hereunder, each Lender agrees that any action taken by the Required Lenders in accordance with the provisions of the Loan Documents, and the exercise by the Required Lenders of the power set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Lenders.

                           (c)         The Administrative Agent is hereby authorized on behalf of all of the Lenders, without the necessity of any notice to or further consent from any Lender, from time to time to take any action with respect to any Collateral or Collateral Documents which may be necessary to perfect and maintain perfected the Liens upon the collateral granted pursuant to the Collateral Documents.

                           (d)        The Administrative Agent shall have no obligation whatsoever to any Lender or to any other Person to assure that the Collateral exists or is owned by any Obligor or is cared for, protected, or insured or has been encumbered or that the Liens granted to the Administrative Agent herein or pursuant thereto have been properly or sufficiently or lawfully created, perfected, protected, or enforced, or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure, or fidelity, or to continue exercising, any of the Rights granted or available to the Administrative Agent in this Section 9.8or in any of the Collateral Documents; it being understood and agreed that in respect of the Collateral, or any act, omission, or event related thereto, the Administrative Agent any act in any manner it may deem appropriate, in its sole discretion, given the Administrative Agent’s own interest in the Collateral as one of the Lenders and that the Administrative Agent shall have no duty or liability whatsoever to any Lender, other than to act without gross negligence or willful misconduct.

                           (e)         The Lenders hereby irrevocably authorize the Administrative Agent, at its option and in its discretion, to release any Lien granted to or held by the Administrative Agent upon any Collateral: (i) upon termination of the Commitments and payment and satisfaction of the Obligations; (ii) constituting property in which no Obligor owned an interest at the time the Lien was granted or at any time thereafter; (iii) constituting property leased to an Obligor under a lease which has expired or been terminated in a transaction permitted under the Loan Document or is about to expire and which has not been, and is not intended by such Obligor to be, renewed; (iv) consisting of an instrument evidencing Indebtedness pledged to the Administrative Agent (for the benefit of the Lenders), if the Indebtedness evidenced thereby has been paid in full; (v) upon the sale, transfer, or disposition of Collateral which is expressly permitted pursuant to the Loan Documents; (vi) as contemplated in Section 10.1(b); or (vii) if approved, authorized, or ratified in writing by the requisite Lenders.  Upon request by the Administrative Agent at any time, the Lenders will confirm in writing the Administrative Agent’s authority to release particular types or items of Collateral pursuant to this Section 9.8.

                           (f)         In furtherance of the authorizations set forth in this Section 9.8, each Lender hereby irrevocably appoints the Administrative Agent its attorney-in-fact, with full power of substitution, for and on behalf of and in the name of each such Lender, (i) to enter into Collateral Documents (including, without limitation, any appointments of substitute trustees under any Collateral Documents), (ii) to take action with respect to the Collateral and Collateral Documents to perfect, maintain, and preserve Lenders’ Liens, and (iii) to execute instruments of release or to take other action necessary to release Liens upon any Collateral to the extent authorized in paragraph (e) hereof.  This power of attorney shall be liberally, not restrictively, construed so as to give the greatest latitude to the Administrative Agent’s power, as attorney, relative to the Collateral matters described in this Section 9.8.  The powers and authorities herein conferred on the Administrative Agent may be exercised by the Administrative Agent through any Person who, at the time of the execution of a particular instrument, is an officer of the Administrative Agent.  The power of attorney conferred by this Section 9.8(f) is granted for valuable consideration and is coupled with an interest and is irrevocable so long as the Obligations, or any part thereof, shall remain unpaid or the Lenders are obligated to make any Borrowings under the Loan Documents.

             SECTION 9.9   Lender Hedging Agreements.  To the extent any Lender or any Affiliate of a Lender is a party to a Lender Hedging Agreement in accordance with the requirements of the Loan Documents and accepts the benefits of the Liens in the Collateral arising pursuant to the Collateral Documents, such Lender (for itself and on behalf of any such Affiliates) shall be deemed (i) to appoint Bank of America, N.A., as its nominee and agent, to act for and on behalf of such Lender or Affiliate thereof in connection with the Collateral Documents and (ii) to be bound by the terms of thisArticle IX.

ARTICLE X
MISCELLANEOUS PROVISIONS

             SECTION 10.1 Waivers, Amendments, Release of Collateral, etc.  (a) The provisions of this Agreement and of each other Loan Document may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to by the Borrower and the Required Lenders; provided, however, that no such amendment, modification or waiver which would: (a) modify any requirement hereunder that any particular action be taken by all the Lenders or by the Required Lenders shall be effective unless consented to by each Lender; (b) modify this Section 10.1, change the definition of “Required Lenders”, increase any Commitment Amount (except as set forth in Section 2.5.1) or the Percentage of any Lender, reduce any fees described in Article III, change the schedule of reductions to the Commitments provided for in Section 2.2.2, release any material portion of the Collateral, except as set forth in Section 9.8 and Section 10.1(b) or otherwise specifically provided in any Loan Document, release any material Guarantor, or extend any Commitment Termination Date, shall be made without the consent of each Lender and each holder of a Note; (c) extend the due date for, or reduce the amount of, any scheduled repayment or prepayment of principal of or interest on any Loan (or  reduce the principal amount of or rate of interest on any Loan) shall be made without the consent of the holder of that Note evidencing such Loan; (d) affect adversely the interests, rights or obligations of the Administrative Agent, shall be made without consent of the Administrative Agent; or (e) affect adversely the interests, rights or obligations of an Issuer in its capacity as such, shall be made without consent of such Issuer.  No failure or delay on the part of the Administrative Agent, any Lender or the holder of any Note in exercising any power or right under this Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further exercise thereof or the exercise of any other power or right.  No notice to or demand on the Borrower in any case shall entitle it to any notice or demand in similar or other circumstances.  No waiver or approval by the Administrative Agent, any Lender or the holder of any Note under this Agreement or any other Loan Document shall, except as may be otherwise stated in such waiver or approval, be applicable to subsequent transactions.  No waiver or approval hereunder shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder.

                           (b)        Upon any sale, transfer, or disposition of Collateral which is permitted pursuant to the Loan Documents, and upon ten (10) Business Days’ prior written request by the Borrower (which request must be accompanied by (a) true and correct copies of all material documents of transfer or disposition, including any contract of sale, (ii) a preliminary closing statement and instructions to the title company, if any, and (iii) all requested release instruments in form and substance satisfactory to the Administrative Agent), the Administrative Agent shall (and is hereby irrevocably authorized by the Lenders to) execute such documents as may be necessary to evidence the release of Liens granted to the Administrative Agent for the benefit of the Lenders pursuant hereto in such Collateral.  In addition, if the Borrower or any of its Subsidiaries own any Margin Stock at the time of the requested release, then together with such request for release, the Borrower shall present a certificate in form and substance satisfactory to the Administrative Agent, setting forth calculations demonstrating compliance with Regulation U and, if required by the Administrative Agent, an opinion of counsel stating that the requested release, if made, will not result in the Lenders being in violation of Regulation U.  The Administrative Agent shall not be required to execute any release instruments on terms which, in the Administrative Agent’s opinion, would expose the Administrative Agent to liability or create any obligation or entail any consequence other than the release of liens without recourse or warranty.  No such release shall impair the Administrative Agent’s lien on the proceeds of sale of such Collateral.

             SECTION 10.2 Notices.  All notices and other communications provided to any party hereto under this Agreement or any other Loan Document shall be in writing or by facsimile and addressed, delivered or transmitted to such party at its address, Telex or facsimile number set forth below its signature hereto or set forth in the Lender Assignment Agreement, or at such other address or facsimile number as may be designated by such party in a notice to the other parties.  Any notice, if mailed and properly addressed with postage prepaid or if properly addressed and sent by pre-paid courier service, shall be deemed given when received; any notice, if transmitted by facsimile, shall be deemed given when transmitted.

             SECTION 10.3 Payment of Costs and Expenses.  The Borrower agrees to pay within 10 days of demand all reasonable expenses of the Administrative Agent (including the fees and out-of-pocket expenses of counsel to the Administrative Agent and of local counsel, if any, who may be retained by counsel to the Administrative Agent) in connection with  the negotiation, preparation, execution and delivery of this Agreement and of each other Loan Document, including schedules and exhibits, and any amendments, waivers, consents, supplements or other modifications to this Agreement or any other Loan Document as may from time to time hereafter be required, whether or not the transactions contemplated hereby are consummated,  the filing, recording, refiling or rerecording of any mortgage, any pledge agreement and any Security Agreement and/or any Uniform Commercial Code financing statements relating thereto and all amendments, supplements and modifications to any thereof and any and all other documents or instruments of further assurance required to be filed or recorded or refiled or rerecorded by the terms hereof or of any mortgage, any pledge agreement or any security agreement, and the preparation and review of the form of any document or instrument relevant to this Agreement or any other Loan Document.

                           The Borrower further agrees to pay, and to save the Administrative Agent and the Lenders harmless from all liability for, any stamp or other similar taxes which may be payable in connection with the execution or delivery of this Agreement, the borrowings hereunder, or the issuance of the Notes or any other Loan Documents.  The Borrower also agrees to reimburse the Administrative Agent and each Lender upon demand for all reasonable out-of-pocket expenses (including attorneys’ fees and legal expenses) incurred by the Administrative Agent or such Lender in connection with the enforcement of any Obligations.

             SECTION 10.4 Indemnification.  In consideration of the execution and delivery of this Agreement by each Lender and the extension of the Commitments, the Borrower hereby indemnifies, exonerates and holds the Administrative Agent and any of its Affiliates and each Lender and each of their respective officers, directors, employees, attorneys and agents (collectively, the “Indemnified Parties”) free and harmless from and against any and all actions, causes of action, suits, losses, costs, liabilities and damages, and expenses incurred in connection therewith (irrespective of whether any such Indemnified Party is a party to the action for which indemnification hereunder is sought), including reasonable attorneys’ fees and disbursements and settlement costs INCLUDING INDEMNIFIED LIABILITIES ARISING OUT OF THE NEGLIGENCE OF AN INDEMNIFIED PARTY (collectively, the “Indemnified Liabilities”), incurred by the Indemnified Parties or any of them as a result of, or arising out of, or relating to (a) any transaction financed or to be financed in whole or in part, directly or indirectly, with the proceeds of any Loan;  (b) the entering into and performance of this Agreement and any other Loan Document by any of the Indemnified Parties; (c) any investigation, litigation or proceeding related to any acquisition or proposed acquisition by the Borrower or any of its Subsidiaries of all or any portion of the stock or assets of any Person, whether or not the Administrative Agent or such Lender is party thereto; (d) any investigation, litigation or proceeding related to any environmental cleanup, audit, compliance or other matter relating to the protection of the environment or the Release by the Borrower or any of its Subsidiaries of any Hazardous Material; or (e) the presence on or under, or the escape, seepage, leakage, spillage, discharge, emission, discharging or releases from, any real property owned or operated by the Borrower or any Subsidiary thereof of any Hazardous Material (including any losses, liabilities, damages, injuries, costs, expenses or claims asserted or arising under any Environmental Law), regardless of whether caused by, or within the control of, the Borrower or such Subsidiary, except for any such Indemnified Liabilities arising for the account of a particular Indemnified Party by reason of the relevant Indemnified Party’s gross negligence or wilful misconduct.

             SECTION 10.5 Survival.  The obligations of the Borrower under Sections 4.3, 4.4, 4.5, 4.6, 10.3 and 10.4, and the obligations of the Lenders under Section 9.1, shall in each case survive any termination of this Agreement, the payment in full of all Obligations and the termination of all Commitments.  The representations and warranties made by each Obligor in this Agreement and in each other Loan Document shall survive the execution and delivery of this Agreement and each such other Loan Document.

             SECTION 10.6 Severability.  Any provision of this Agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such provision and such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or such Loan Document or affecting the validity or enforceability of such provision in any other jurisdiction.

             SECTION 10.7 Headings.  The various headings of this Agreement and of each other Loan Document are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or such other Loan Document or any provisions hereof or thereof.

             SECTION 10.8 Execution in Counterparts.  This Agreement may be executed by the parties hereto in several counterparts, each of which shall be executed by the Borrower and the Administrative Agent and be deemed to be an original and all of which shall constitute together but one and the same agreement.

             SECTION 10.9 Governing Law; Entire Agreement.  THIS AGREEMENT, THE NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS AND APPLICABLE U.S. FEDERAL LAW.  This Agreement, the Notes and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto.

             SECTION 10.10             Successors and Assigns.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that:  the Borrower may not assign or transfer its rights or obligations hereunder without the prior written consent of the Administrative Agent and all Lenders; and  the rights of sale, assignment and transfer of the Lenders are subject to Section 10.11.

             SECTION 10.11             Sale and Transfer of Loans and Notes; Participations in Loans and Notes.  Each Lender may assign, or sell participations in, its Loans and Commitments to one or more other Persons in accordance with this Section 10.11.

             SECTION 10.11.1          Assignments.  Any Lender, (a) with the written consents of the Administrative Agent and, so long as no Event of Default has occurred and is continuing, the Borrower (which consents shall not be unreasonably delayed or withheld and which consent, in the case of the Borrower, shall be deemed to have been given in the absence of a written notice delivered by the Borrower to the Administrative Agent, on or before the fifth Business Day after receipt by the Borrower of such Lender’s request for consent, stating, in reasonable detail, the reasons why the Borrower proposes to withhold such consent) may at any time assign and delegate to one or more commercial banks or other financial institutions, and (b) with notice to the Borrower and the Administrative Agent, but without the consent of the Borrower or the Administrative Agent, may assign and delegate to any of its Affiliates or to any other Lender (each Person described in either of the foregoing clauses as being the Person to whom such assignment and delegation is to be made, being hereinafter referred to as an AAssignee Lender”), all or any fraction of such Lender’s total Loans and Commitments (which assignment and delegation shall be of a constant, and not a varying, percentage of all the assigning Lender’s Loans and Commitments) in a minimum aggregate amount of $5,000,000; provided, however, that any such assignments by a Lender shall be pro rata with any assignment by such Lender or an Affiliate of such Lender of its interests in the Canadian Facility; and provided further that any such Assignee Lender will comply, if applicable, with the provisions contained in the last sentence of Section 4.6 and further, provided, however, that, the Borrower, each other Obligor and the Administrative Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so assigned and delegated to an Assignee Lender until (c) written notice of such assignment and delegation, together with payment instructions, addresses and related information with respect to such Assignee Lender, shall have been given to the Borrower and the Administrative Agent by such Lender and such Assignee Lender, (d) such Assignee Lender shall have executed and delivered to the Borrower and the Administrative Agent a Lender Assignment Agreement, accepted by the Administrative Agent, and (e) the processing fees described below shall have been paid.  From and after the date that the Administrative Agent accepts such Lender Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed automatically to have become a party hereto and to the extent that rights and obligations hereunder have been assigned and delegated to such Assignee Lender in connection with such Lender Assignment Agreement, shall have the rights and obligations of a Lender hereunder and under the other Loan Documents, and (y) the assignor Lender, to the extent that rights and obligations hereunder have been assigned and delegated by it in connection with such Lender Assignment Agreement, shall be released from its obligations hereunder and under the other Loan Documents.  Within five (5) Business Days after its receipt of notice that the Administrative Agent has received an executed Lender Assignment Agreement, the Borrower shall execute and deliver to the Administrative Agent (for delivery to the relevant Assignee Lender) new Notes evidencing such Assignee Lender’s assigned Loans and Commitments and, if the assignor Lender has retained Loans and Commitments hereunder, replacement Notes in the principal amount of the Loans and Commitments retained by the assignor Lender hereunder (such Notes to be in exchange for, but not in payment of, those Notes then held by such assignor Lender).  Each such Note shall be dated the date of the predecessor Notes.  The assignor Lender shall mark the predecessor Notes Aexchanged” and deliver them to the Borrower.  Accrued interest on that part of the predecessor Notes evidenced by the new Notes, if any, shall be paid as provided in the Lender Assignment Agreement.  Accrued interest on that part of the predecessor Notes evidenced by the replacement Notes shall be paid to the assignor Lender.  Accrued interest and accrued fees shall be paid at the same time or times provided in the predecessor Notes and in this Agreement.  Such assignor Lender or such Assignee Lender must also pay a processing fee to the Administrative Agent upon delivery of any Lender Assignment Agreement in the amount of $3,500.  Any attempted assignment and delegation not made in accordance with this Section 10.11.1 shall be null and void.

             SECTION 10.11.2          Participations.  Any Lender may at any time sell to one or more commercial banks or other Persons (each of such commercial banks and other Persons being herein called a AParticipant”) participating interests in any of the Loans, Commitments, or other interests of such Lender hereunder; provided, however, that (a) no participation contemplated in this Section 10.11 shall relieve such Lender from its Commitments or its other obligations hereunder or under any other Loan Document, (b) such Lender shall remain solely responsible for the performance of its Commitments and such other obligations, (c) the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and each of the other Loan Documents, (d) no Participant, unless such Participant is an Affiliate of such Lender, or is itself a Lender, shall be entitled to require such Lender to take or refrain from taking any action hereunder or under any other Loan Document, except that such Lender may agree with any Participant that such Lender will not, without such Participant’s consent, take any actions of the type described in clause (b) or (c) of Section 10.1, and (e) the Borrower shall not be required to pay any amount under Section 4.6 that is greater than the amount which it would have been required to pay had no participating interest been sold.  Subject to the above, the Borrower acknowledges and agrees that each Participant, for purposes of Sections 4.3, 4.4, 4.5, 4.6, 4.8, 10.3 and 10.4, shall be considered a Lender.

             SECTION 10.12             Other Transactions.  Nothing contained herein shall preclude the Administrative Agent or any other Lender from engaging in any transaction, in addition to those contemplated by this Agreement or any other Loan Document, with the Borrower or any of its Affiliates in which the Borrower or such Affiliate is not restricted hereby.

             SECTION 10.13             Forum Selection and Consent to Jurisdiction.  ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE LENDERS OR THE BORROWER MAY BE BROUGHT AND MAINTAINED IN THE COURTS OF THE STATE OF TEXAS OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN  DISTRICT OF TEXAS.  THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION.  THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF TEXAS.  THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

             SECTION 10.14             Waiver of Jury Trial.  THE ADMINISTRATIVE AGENT, THE LENDERS AND THE BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE ADMINISTRATIVE AGENT, THE LENDERS OR THE BORROWER.  THE BORROWER ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE ADMINISTRATIVE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.

             SECTION 10.15             Confidentiality.  Each Lender and the Administrative Agent agrees to use reasonable commercial efforts not to disclose without the prior written consent of the Borrower (other than to their employees, auditors or counsel or to another Lender if the Lender or such Lender’s holding or parent company or the Administrative Agent in its sole discretion determines that any such party should have access to such information) any confidential information with respect to the Borrower or any Subsidiary which is furnished pursuant to this Agreement, provided, that any Lender and the Administrative Agent may disclose any such information (a) as has become generally available to the public, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, provincial, state or Federal regulatory body having or claiming to have jurisdiction over such Lender or the Administrative Agent or to the Federal Reserve Board, Bank of Canada, the Office of the Superintendent of Financial Institutions, Canada Deposit Insurance Corporation, the Federal Deposit Insurance Corporation, National Association of Insurance Commissioners or similar organizations (whether in the United States or elsewhere) or their successors, (c) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation, (d) in order to comply with any law, order, regulation or ruling applicable to such Lender or the Administrative Agent, and (e) to any Affiliate of such Lender or Administrative Agent.

                           A Lender may furnish any publicly available information concerning the Borrower or any of its Subsidiaries in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants) without the consent of the Borrower.  Nonpublic information concerning the Borrower or any of its Subsidiaries shall not be furnished by any Lender to assignees and participants (including prospective assignees and participants) without the prior written consent of the Borrower, which consent shall not be unreasonably withheld or delayed.

             SECTION 10.16             Releases.  If all outstanding Loans and other Obligations have been indefeasibly paid in full and no Letters of Credit are outstanding, the Commitment Amounts have terminated or have been reduced to zero pursuant to Section 2.2, and all Lender Hedging Agreements have terminated, the Administrative Agent agrees to, and the Lenders hereby instruct the Administrative Agent to, at the Borrower’s expense, execute such releases of the Collateral Documents as the Borrower shall reasonably request and this Agreement shall be deemed terminated except that such termination shall not relieve Borrower of any obligation to make any payments to the Administrative Agent or any Lender required by any Loan Document to the extent accruing, or relating to an event occurring, prior to such termination.

             SECTION 10.17             Priority of Hedging Obligations.  Borrower, Lenders and Administrative Agent hereby agree that (i) any amounts received in satisfaction of any Obligations arising under the Loan Documents, including, without limitation, Obligations under this Agreement and any Lender Hedging Agreement, shall rank pari passu in right of payment and shall be used to repay such Obligations on a pro rata basis, and (ii) except as otherwise set forth in Section 10.17(i) above, all Hedging Obligations arising in connection with any Hedging Agreement are hereby expressly subordinated in right of payment to the prior payment in full in cash of all Obligations under the Loan Documents, other than any Lender Hedging Agreement.

             SECTION 10.18             Certain Remedies.  Notwithstanding anything to the contrary contained herein or in the Collateral Documents, neither the Administrative Agent nor the Lenders shall have the right to collect income, rents, royalties, revenues, issues, profits or proceeds from the Mortgaged Properties as therein defined unless an Event of Default has occurred and is continuing.

             SECTION 10.19             Maximum Rate.  It is the intention of the parties hereto to comply strictly with applicable usury laws, if any; accordingly, notwithstanding any provision to the contrary contained herein or in any fee letter or other Loan Document or any other document otherwise relating hereto, in no event shall this Agreement or any Note or such documents require or permit the payment, taking, reserving, receiving, collection or charging of any sums constituting interest under applicable laws which exceed the maximum amount permitted by such laws.  If any such excess interest is called for, contracted for, charged, taken, reserved, or received in connection with any Loan or in any fee letter or other Loan Document, or in any communication by the Administrative Agent, any Lender or any other person to the Borrower or any other person, or in the event all or part of the principal or interest of any Loan shall be prepaid or accelerated, so that under any of such circumstances or under any other circumstance whatsoever the amount of interest contracted for, charged, taken, reserved, or received on the amount of principal actually outstanding from time to time under this Agreement or any Note shall exceed the maximum amount of interest permitted by applicable usury laws, then in any such event it is agreed as follows: (i) the provisions of this paragraph shall govern and control, (ii) neither the Borrower nor any other person or entity now or hereafter liable for the payment of any Loan shall be obligated to pay the amount of such interest to the extent such interest is in excess of the maximum amount of interest permitted by applicable usury laws, (iii) any such excess which is or has been received notwithstanding this paragraph shall be credited against the then unpaid principal balance of the Loans or, if the Loans have been or would be paid in full by such credit, refunded to the Borrower, and (iv) the provisions of this Agreement, the Notes and the other Loan Documents, and any communication to the Borrower, shall immediately be deemed reformed and such excess interest reduced, without the necessity of executing any other document, to the maximum lawful rate allowed under applicable laws as now or hereafter construed by courts having jurisdiction hereof or thereof.  Without limiting the foregoing, all calculations of the rate of interest contracted for, charged, collected, taken, reserved, or received in connection herewith which are made for the purpose of determining whether such rate exceeds the maximum lawful rate shall be made to the extent permitted by applicable laws by amortizing, prorating, allocating and spreading during the period of the full term of the Loans, including all prior and subsequent renewals and extensions, all interest at any time contracted for, charged, taken, collected, reserved, or received.  The terms of this paragraph shall be deemed to be incorporated in every Loan Document and communication relating to this Agreement, the Loans and the Notes.

                           To the extent that the interest rate laws of the State of Texas are applicable to the Loans, the applicable interest rate ceiling is the weekly ceiling (formerly the indicated rate ceiling) determined in accordance with Tex. Rev. Civ. Stat., Title 79, Article 5069-1D.003, also codified at Texas Finance Code, Section 303.301 (formerly Article 5069-1.04 (a)(1)), and, to the extent that this Agreement is deemed an open end account as such term is defined in Tex. Rev. Civ. Stat., Title 79, Article 5069-1B.002(14), also codified at Texas Finance Code Section 301.001(3) (formerly Article 5069-1.01(f)), the Lenders retain the right to modify the interest rate in accordance with applicable law.

                           The parties agree that Texas Finance Code, Chapter 346 (formerly Tex. Rev. Civ. Stat., Title 79, Chapter 15), which regulates certain revolving loan accounts and revolving triparty accounts, shall not apply to any revolving loan accounts created under this Agreement or the Notes or maintained in connection therewith.

             SECTION 10.20             Entire Agreement.

                           THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

[SIGNATURES BEGIN ON FOLLOWING PAGE]

                           IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized as of the day and year first above written.

MARKWEST HYDROCARBON, INC.
By:
Name:	Gerald A. Tywoniuk
Title:	Vice President, Finance
Address for Notices:			155 Inverness Drive West
			Suite 200
			Englewood, Colorado 80112
Telephone No:			(303) 290-8700
Facsimile No.:			(303) 290-8769
Attention:		Contract Administration

BANK OF AMERICA, N.A., as Administrative Agent
By:
	Richard L. Stein
	Vice President
Address for Notices:			901 Main Street,
			14th Floor
			Dallas, Texas 75202
Telephone No.:			(214) 209-2642
Facsimile No.:			(214) 290-8364
Attention:		Mr. Ramon Presas
with a copy to:
333 Clay Street, Suite 4550
Houston, Texas 77002
Telephone No.:			(713) 651-4850
Facsimile No:			(713) 651-4841
Attention:		Mr. Richard L. Stein

PERCENTAGE	LENDERS
100%	BANK OF AMERICA, N.A.
	By:
		Richard L. Stein
		Vice President
	Domestic Office:
	901 Main Street, 14th Floor
	Dallas, Texas 75202
	Telephone No.:			(214) 209-2642
	Facsimile No.:			(214) 290-8364
	Attention:		Mr. Ramon Presas
	LIBOR Office:
	901 Main Street, 14th Floor
	Dallas, Texas 75202
	Telephone No.:			(214) 209-2642
	Facsimile No.:			(214) 290-8364
	Attention:		Mr. Ramon Presas
	with a copy to:
	333 Clay Street, Suite 4550
	Houston, Texas 77002
	Telephone No.:			(713) 651-4850
	Facsimile No.:			(713) 651-4841
	Attention:		Mr. Richard L. Stein

EX-99.1

EXHIBIT 99.1

MARKWEST ACQUIRES CANADIAN NATURAL GAS PRODUCTION COMPANIES FOR $51 MILLION (U.S.)—MORE THAN DOUBLING RESERVES

                DENVER—August 13, 2001—MarkWest Hydrocarbon, Inc. (AMEX: MWP), today announced the acquisition of two privately owned independent exploration and production companies—Leland Energy Canada Ltd. and Watford Energy Ltd., both headquartered in Calgary, Alberta, Canada—for $51 million (U.S.). The same management directs both companies and will remain in place and continue to operate as before the transaction.

                The two entities will add 15,000 Mcf (thousand cubic feet) per day and 190 barrels of oil per day to MarkWest's current net production of 6,100 Mcf per day. The reserve report on the Canadian entities by Gilbert Laustsen Jung Associates indicates net acquired proved reserves of 26.4 billion cubic feet equivalent (Bcfe), which will increase MarkWest's total net proved reserves to more than 63 Bcfe. The current present value discounted at 10 percent (PV10) of the acquired companies' proved reserves is $47 million, while MarkWest's PV10 prior to this transaction was $36 million.

                Importantly, the acquisition adds more than 300 drillable locations, mostly defined by three-dimensional (3D) seismic. The Canadian companies' net land base is more than 106,000 acres, with 80 percent being highly exploitable. The acreage is located in central and southern Alberta and has excellent year-round access. The existing wells are approximately 3,500 feet deep, with relatively high initial production and a reserve life of five to seven years. 3D seismic, scheduled for late 2001, is anticipated to provide many additional drillable locations. The capital expenditure budget is expected to exceed $40 million over the next 24 months.

                The transaction has been financed using bank debt through an expanded $130 million line with MarkWest's lead banker, Bank of America N.A. The acquisition is expected to be accretive to both earnings and EBITDA in 2002 and beyond. John Fox, CEO, commented, "Unused capacity under our increased borrowing arrangement will be approximately $25 million to $30 million. Absent further acquisitions, we expect cash flow to fully fund ongoing capital expenditures."

                Leland and Watford employ 19 people as permanent staff and consultants and operate most wells with a high operating interest. The management group has been working together for more than a decade and has been highly successful both at Chevron Canada and independently, operating Leland and Watford. As with most of MarkWest's exploration projects, there is an attractive gathering and processing opportunity associated with this multiyear development project.

                Fox added, "This is a major new core area for MarkWest in a prolific gas-producing basin. Not only will it more than triple our equity gas production, but the future development potential over the next four to five years is outstanding. We are very impressed with our Canadian management team and are very pleased they will remain with the company. Finally, this not only provides a fee-based midstream opportunity, but it also further reduces the more volatile Appalachian liquids margin business to less than 25 percent of our cash operating income."

                Banc of America Securities LLC served as advisor to MarkWest on the transaction.

MARKWEST HYDROCARBON, INC., OPERATES THROUGH TWO BUSINESS SEGMENTS: GATHERING, PROCESSING, AND MARKETING AND EXPLORATION AND PRODUCTION. THE GATHERING, PROCESSING, AND MARKETING PORTION IS OUR TRADITIONAL "MIDSTREAM" BUSINESS, WHICH INVOLVES GATHERING NATURAL GAS FROM THE WELLHEAD AND REMOVING IMPURITIES SUCH AS CO2 AND SULFUR DIOXIDE ALONG WITH THE VALUABLE NATURAL GAS LIQUIDS. WE ALSO HAVE VERY EXTENSIVE STORAGE, TRANSPORTATION AND MARKETING FACILITIES. THE EXPLORATION AND PRODUCTION SEGMENT PRODUCES NATURAL GAS IN THE SAN JUAN BASIN OF COLORADO AND NEW MEXICO, WESTERN AND EASTERN MICHIGAN, AND WITH THIS TRANSACTION, ALBERTA, CANADA. NOT ONLY IS THIS SECOND SEGMENT GROWING VERY RAPIDLY, BUT IT ALSO HELPS DRIVE OUR MIDSTREAM BUSINESS AS WE PROVIDE SERVICES TO OTHER PRODUCERS.

THIS PRESS RELEASE INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED OR INCORPORATED HEREIN MAY CONSTITUTE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO BE CORRECT. THE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND UNCERTAINTIES THAT AFFECT THE COMPANY'S OPERATIONS, FINANCIAL PERFORMANCE AND OTHER FACTORS AS DISCUSSED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. AMONG THE FACTORS THAT COULD CAUSE RESULTS TO DIFFER MATERIALLY ARE THOSE RISKS DISCUSSED IN THE COMPANY'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000.